Conceptual Framework for the Adoption of General Takaful Among MSME Owner-Managers in North-West Nigeria: The Role of MSME Owner-Manager Characteristics

Abstract

The ability to manage risk is especially important to Micro, Small and Medium-sized enterprises (MSMEs) which constitute more than 90% of all businesses in Nigeria. One of the mitigating techniques in minimizing risk is through insurance and Nigeria being a Muslim-majority country, takaful is the alternative to conventional insurance. Despite their fragile nature and their exposure to various threats, MSMEs are the least segment utilizing insurance cover. Based on the reports from the country’s financial regulators it shows that majority of these businesses do not participate in any insurance scheme. Furthermore, there are less studies that examined takaful adoption by MSMEs, especially in Nigeria. These past studies are also inconclusive on the significant factors influencing adoption especially from the behavioral perspective. This paper aims to propose a conceptual framework to study the factors that influence general takaful adoption among MSMEs owner-managers’ in North-West Nigeria. An integrated framework based on the Diffusion of Innovation Theory (DOI) and the Unified Theory of Acceptance and the Use of Technology (UTAUT) was developed to examine what motivates MSMEs owner-managers to adopt general takaful. Furthermore, the proposed model incorporates MSME owner-manager’s personal and demographic characteristics (age, gender, education, prior loss experience and religiosity) as potential moderators in the study to enhance the predictive power of the model. Validating the conceptual framework of this research will be useful to takaful operators, financial regulators and policy makers in Nigeria to devise appropriate strategies that will increase the adoption rate of general takaful scheme among MSMEs.