Takaful Insurance Boosts Saudi Arabia's Economy and Job Market Growth (2010-2021)

What is it about?

This study examines the influence of Takaful insurance on the economy of the Kingdom of Saudi Arabia from 2010 to 2021, using the generalized method of moments (GMM) approach to assess its correlation with economic growth. The scope includes defining Takaful insurance, its legal basis, and its contribution to economic development, focusing on employment, income localization, and financial stability. The findings indicate that despite the rapid growth of Takaful, its contribution to the non-oil GDP remains minimal, though it is projected to employ 74% of Saudis in the sector by 2030. The study suggests strengthening the regulatory framework and developing products and services leveraging emerging technologies to enhance the sector's growth. Additionally, it calls for increasing consumer awareness and investment in the sector to boost its economic impact. The results emphasize the role of Takaful insurance in sustainable economic development, particularly in alignment with Saudi Vision 2030.

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Why is it important?

This study investigates the influence of Takaful insurance on the economic growth of the Kingdom of Saudi Arabia from 2010 to 2021. The research is significant as it explores the burgeoning Takaful insurance industry, which aligns with Islamic Sharia principles and contributes to the nation's economic diversification efforts under Saudi Economic Vision 2030. Understanding Takaful's role in employment generation and financial stability can guide policymakers in enhancing regulatory frameworks to further leverage this sector for sustainable economic development. Key Takeaways: 1. The research demonstrates that while the Takaful insurance industry in Saudi Arabia is rapidly growing, with total premiums reaching SAR 42.03 billion in 2021, its contribution to non-oil GDP remains limited, highlighting the need for strategic enhancement of its economic impact. 2. Findings reveal that the Takaful sector significantly aids in employment creation and localization, with projections suggesting that 74% of Saudis will be employed in the Takaful industry by 2030, indicating its potential as a major employment generator. 3. The study recommends strengthening regulatory frameworks and leveraging emerging technologies to develop Takaful products and services, which can enhance consumer awareness and increase the sector's contribution to economic growth.