SERVICE QUALITY, PERCEIVED VALUE AND TAKAFUL SUBSCRIPTION DECISIONS: THE MODERATING ROLE OF FINANCIAL LITERACY

Abstract

Despite increasing awareness of takaful products, participation rates remain lower than expected, suggesting that awareness alone is insufficient to drive subscription decisions. Existing studies have largely examined service-related factors, perceived value, and financial capability independently, offering limited insight into how these factors jointly influence consumer behaviour. Grounded in the Theory of Planned Behavior (Ajzen, 1991), Consumer Value Theory, and Information Processing Theory, this study examines the effects of service quality and perceived value on takaful subscription decisions and investigates the moderating role of financial literacy.  A quantitative research design was employed using survey data collected from 350 Malaysian consumers through convenience sampling. Data were analysed using Partial Least Squares Structural Equation Modelling (PLS-SEM) to assess both direct and moderating relationships. The findings indicate that service evaluations and perceived benefits significantly influence subscription decisions, with perceived value emerging as the strongest predictor, while financial literacy strengthens both relationships by enhancing consumers’ ability to evaluate product information and benefits.  This study contributes to the literature by integrating service quality, perceived value, and financial literacy within a unified framework and demonstrating that financial literacy functions as both a direct determinant and a moderating mechanism in Islamic financial decision-making. Practically, the findings suggest that takaful operators should strengthen customer engagement, simplify product information, and communicate long-term protection benefits more effectively, while policymakers should expand targeted financial literacy initiatives to encourage greater participation in the takaful market.