ZAKAT COLLECTION AND DISTRIBUTION IN MALAYSIA

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ZAKAT COLLECTION AND DISTRIBUTION IN MALAYSIA NORLELABT ZAMAN 1 MOHDKHAIRYKAMARUDIN 2 NOOR ASMANI AHMAD 3 1 Commerce Department, Politeknik Sultan Salahuddin Abdul Aziz Shah, Malaysia 2 Faculty of

encourage and influence zakat payers to pay the zakat to the zakat institutions. Zakat institutions are responsible to collect zakat fund from the Muslims and distribute it to the needy.

1 ZAKAT COLLECTION AND DISTRIBUTION IN MALAYSIA NORLELABT ZAMAN 1 MOHDKHAIRYKAMARUDIN 2 NOOR ASMANI AHMAD 3 1 Commerce Department, Politeknik Sultan Salahuddin Abdul Aziz Shah, Malaysia 2 Faculty of Entrepreneurship and Business, Universiti Malaysia Kelantan, Malaysia 3 Faculty of Entrepreneurship and Business, Universiti Malaysia Kelantan,Malaysia ABSTRACT Zakat management is very crucial to encourage and influence zakat payers to pay the zakat to the zakat institutions. Zakat institutions are responsible to collect zakat fund from the Muslims and distribute it to the needy. However, a lot of zakat surplus which were not distributed to the asnaf. Therefore, this study aims to examine the trends of zakat collection and distribution in Malaysia. This study employed quantitative approach to examine the relationship between zakat collection and distribution. The data is gathered from annual report Islamic Religious Council for each state in Malaysia ( ). This study indicates that that the trend for zakat collection in Malaysia is increasing every year. In contrast, the trend for zakat distribution is always lower than collection every year. This study also find that there is statistically significant relationship between collection and distribution of zakat in Malaysia. Therefore, zakat institutions should improve their management skills to increase the number of distribution to the needy. It will create a good image and confidence by the zakat payer in Malaysia. Keyword(s): Zakat, Collection, Distribution Introduction Zakat fund will generate and boost the economic activities through the increasing on individual's purchasing power which creates a chain effect on production and consumer demand(bidin, Md. Idris, and Syamsudin, 2009; Kadri, Ahmad and Mohd. Noor, 2012). At the same time, zakat has been required to comply with clear goals in society to form of social security for the poor and needy, to develop a balanced economic growth through redistribution of wealth in society, and purification and spiritual development (Ibrahim, 2008). Zakat is a simple transfer of part of a certain size to be allocated the property of the rich to the poor so that there is justice. According to Ibrahim (2008), zakat should be distributed to particular groups to meet their basic needs in the short and long term. Proper zakat management is crucial to demonstrate a good image of Islam. The effective and systematic management of zakat will encourage and influence the zakat institutions in improving the collection and distribution of zakat. In terms of collection, some improvement have been made such as some states in Malaysia have privatized their zakat institution. However, Ahmad and Wahid (2005a) indicated that there are still some weakness. Meanwhile, the effective of zakat distribution will increase the productivity among recipients.the zakat fund will be consumed for education among orphans and poor, thus will change the fortunes of their life. Though, Wahid & Ahmad and Abdul Kader (2009) indicated, there were a lot of zakat surplus which were not distributed to the asnafs by the zakat institution. It will lead to the wastage and injustice Muslim economics. At the same time, this situation will contribute to the bad impression towards the ability of zakat institution if this institution unable to distribute zakat to the recipients fairly and 86 icmrrjournal@gmail.com

2 comprehensively (Wahid, Ahmad and Abdul Kader, 2009). Due to these issues of zakat management in Malaysia, this study aims to examine the trends of zakat collection and distribution in Malaysia. This paper consists offive parts. The first part is the introduction of the research. Second and third partsare the literature review and research methodology. The next part are the finding and discussion and the last part is conclusion. Literature review Malaysia zakat institution has undergone a revolution in the management of the distribution of zakat funds (AbRahman, Ali Basah, Abdullah, Nooh, and Fauzi, 2014). According to the Md. Idris (2006) state administrative and economic management, compliance behaviour of community members and laws that clearly enforcement are factors that affect the collection of individual. According to AbRahman, Ali Basah, Abdullah, Nooh, and Fauzi (2014), the current state of development of zakat institutions in Malaysia are positive especially in terms of collection of zakat increased drastically. Zakat institutions which participate in the privatization program to enhance the management of zakat institutions has appointed or set up subsidiaries to manage the zakat collection and distribution. For instance, Pusat Zakat Selangor is a subsidiary under supervision of the Selangor Islamic Religious Council (MAIS). The same applies to Pahang Zakat Collection Centre (established on 2 nd, 1996), Zakat Collection Centre Wilayah Persekutuan Kuala Lumpur (established on January, 1991), the Central Zakat Negeri Sembilan (established on January, 2000), the Central Zakat Melaka (established on 19 th September, 2000) and Zakat Management Centre Penang (established on June, 1995) (Ahmad, Wahid, Mohamad, 2006). The aspects of the collection and distribution of zakat had been studied by many researchers of zakat but the study on the distribution of zakat and its effectiveness is less discussed. The performance of zakat collection cannot be denied has increased from year to year (Ahmad and Wahid, 2005a). However, Wahid, Ahmad and Abdul Kader (2009) indicated that there were a lot of excess zakatand distributed to asnafs by each institution. They also found that there are still many Muslims in Malaysia that are not satisfied with the method of distribution of zakat. Zakat collection services that have undergone according to Ahmad and Wahid (2005a), various efforts have been undertaken to improve the collection of zakat. The first stage is by adding awareness campaigns about the obligation zakat and its importance for the development of Muslims. Even though, the campaigns which were conducted by Islamic religious department created the awareness of public, but it did not significantly improve the zakat collection. This study also indicated that community s perception regarding to the unreliability of zakat management by the Islamic Religious department in managing the distribution of zakat fund (Ahmad and Wahid, 2005a). Various transformations with ISO procedures are also should increase the efficiency of distribution services as par as of zakat collection services (Ahmad and Wahid, 2005a). The corporate image should be emphasized as it is a great outcome on the distribution of zakat confidence than the proclamation of a comprehensive law through various media (Ahmad and Wahid, 2005a). The efficiency and systematic of performance the distribution of zakat will encourage and influence the collection of zakat in the future (Abdul Lateff, Palil and Hassan, 2014). Zakat management can be improved by setting up the subsidiary companies which are accountable for managing the collection and distribution of zakat or establish programs for the privatization of zakat institutions (Ahmad, Wahid and Mohamad, 2006). The types of property can be expand of zakat to 87 icmrrjournal@gmail.com

3 the other sources than traditional sources because there are many types present economic activities will generate income. While many facilities have been made as to the income tax rebate of zakat payment, provide a deduction from salary on a monthly basis and open up the payment counter at the post office and bank, the collection of zakat property increases each year but increase each year is still low (Ahmad and Wahid, 2005b). Ahmad and Wahid (2005a) explained that the awareness of paying zakat is important because it is a must that are included in the tenets of Islam. Zakat institutions should enhance campaigns and lectures to ensure that the Muslim community in Malaysia recognizes the importance of zakat payment and Muslim perception of zakat institutions through improved efficiency in the management of zakat (Ahmad and Wahid, 2005a). Research Methodology This study employed quantitative approach in order to examine the relationship between zakat collection and zakat distribution. The data of this study gathered from annual report for zakat collection and distribution, Islamic Religious Council for each state in Malaysia. The data is from 2000 till To analyze the data, this study employed IBM SPSS version 21 to test the correlation between zakat collection and distribution in Malaysia. Finding and Discussion The graph 1 shows that the overall amount of all state for zakat collection and distribution in Malaysia. The total amount of zakat collection is increase over the year from 2000 to In 2000, the collection of zakat at RM261, 394, increase slightly until 2006 at RM670, 636, Then, in 2007 until 2011 the total zakat collection having a moderate increase and it increase again in 2012 at RM1,927,349, to RM2,258,024, in The differences of changes the zakat collection in 2012 to 2013 about RM330,675, at 17.16%. The graph is also shows the distribution of zakat continuous improvement from 2000 to In this case the collection of zakat show a higher than the zakat distributions throughout Malaysia. In 2000 until 2008, the distribution of zakat increase slightly and rose sharply to RM1, 020,752, in Then, the distribution of zakat moderate increase in 2009 until In 2001, it was the highest increasing percentage which is 22.55%. However, the gap between collection and distribution is the highest in 2013 which is RM679, 580, In other words, the distribution in 2013 is only 69.90% from total collection. 2,500,000, ,000,000, ,500,000, ,000,000, Collection Distribution 500,000, icmrrjournal@gmail.com

4 Graph1: Statistics of Total Amount of Zakat Collection and Distribution in Malaysia Based on table 1, there is statistically significant relationship between collection and distribution of zakat in Malaysia, which is statistically significant (r = 0.991, n = 14, P <.000). Therefore, this study reject H 0. Table 1: Correlation of Zakat Collection and Distribution in Wilayah Persekutuan Zakat Distribution Zakat Collection Pearson Correlation.991 ** Sig..000 N 14 **. Correlation is significant at the 0.01 level (2-tailed) Based on the results, this study indicates that the trend for zakat collection in Malaysia is increasing every year. In contrast, the trend for zakat distribution is always lower than collection every year. According to Ahmad & Wahid (2005s), until now the role of the zakat institution to help the poor does not get highlighted and less convincing. The effectiveness of its implementation depends on the commitment of all parties, whether public or government (Abdul Wahid, Daud& Ahmad, 2011). So, every implementation to ensure the zakat institutions must be act with good commitment between government and society. The increasing trend of zakat collection for every state in Malaysia may be influenced by two factors; (1) internal factor that encourages an individual to pay the zakat and (2) the management of zakat institutions. According to AbdulWahab&Borhan (2014), identified internal factor is the attitude, the degree of faith, knowledge, awareness, self-satisfaction (including moral values and seek the pleasure of Allah), personal accountability and self-efficacy. So, it is likely the increasing of zakat collection because the increasing awareness of number in zakat payer. People begin to realize Muslim is compulsory to pay zakat. In fact, they know that Muslim who does not pay zakat will be punished. Paying of zakat is something that is required by religion and sin if not adhered (Saad, MdIdris&Bidin, 2009). Next, the level of confidence for individual towards the management of zakat institutions is increasing. Society believes that the management of zakat institutions had performed properly. People also believe that the institutions can ensure the distribution of zakat only for asnaf. The zakat institution is not-for-profit organization that manages the collection and distribution of zakat (Abdul Wahab&Borhan, 2014). Society believes that the governance of zakat institutions is the best. Besides that, the improvement of living among society also influenced the increasing of zakat collection. People s lives have changed from being unable to pay zakat to able to pay for zakat. Other than that, the facilities are provided to enable zakat payers to pay zakat. Therefore, in order to ensure the payment of zakat, zakat institutions have provided several methods to pay zakat such as paying zakat at the counter of zakat institution, payroll deduction, internet banking (online payment), bank counters, credit card, phone banking, ATMs and others. At the same time, the possibility factors why zakat collection and distribution increase is possibly because of systematic of zakat institution management. This is due to the effectiveness of the campaign that is carried out by the zakat institutions. The campaigns are attract people to pay zakat. For example the charity institutions used electronic media, magazines, newspapers, seminar and others icmrrjournal@gmail.com

5 Although the collection of zakat for each state is high but zakat distribution is low every year. In this case, the collection of zakat should be distributed directly to the asnaf without leaving any money in the treasury. As happen during Prophet Muhammad S.A.W, he will ensure that each zakat collection is distributed directly to asnaf without any money left in the treasury. The distribution of zakat lower than collection may be caused by several factors. First, the recipients do not have any exposure or knowledge on how to apply for zakat. According to Ab Rahman & Anwar (2013),the poor are not given the knowledge and the ways on how to apply for assistants and education schemes, which only a few benefit from it. In addition, the level of confidence of the asnaf to apply for zakat is lower due to the bureaucratic system. This is because the asnafs perceive each zakat application will take a long time. Besides, the bureaucracy is a way of governing that involves various stages or management process and a lot of regulations Conclusion This study is important to improve zakat management by zakat institutions. This is due to the effectiveness of the campaign that is carried out by the zakat institutions. The campaign are effective to attract people to pay zakat. Besides, the facilities are provided to enable zakat payers to pay zakat. Confidence of people in the efficiency and transparency of the zakat institutions to manage money should be increased so that individual will pay zakat to the zakat institutions. Zakat institution also should be avoid from bureaucratic system. This is because the asnafs perceive each zakat application will take a long time. The government also needs to implement it to improve the enforcement of obligatory payment of zakat collection but the government must also make improvements in the distribution of zakat in advance so that it can restore public confidence in the institution of zakat. References Ab Rahman, A. & Anwar, S. M. (2013). Peranan institusi zakat dalam pembangunan pendidikan asnaf fakir dan miskin di malaysia. Paper presented at 5th IslamicEconomics System Conference (iecons 2013). Ab Rahman, A., Ali Basah, M. Y., Abdullah, M., Nooh, M. N. & Mohd Fauzi, A. A. (2014). Keberkesanan program usahawan asnaf oleh institusi zakat dalammenginterpretasikan keharmonian ummah. Paper presented at InternationalConference on Arabic Studies and Islamic Civilization (icasic 2014). Abdul Lateff, E.E.,Palil, M. R. & Hassan, M.S (2014). Prestasi Kecekapan Agihan Kewangan dan Bukan Kewangan dalam Kalangan Institusi Zakat di Malaysia. Jurnal Ekonomi Malaysia 48 (2), Abdul Wahab, A. & Borhan, J. T. (2014). Faktor penentu pembayaran zakat oleh entiti perniagaan di Malaysia : Satu tinjauan teori. Shariah Journal 22 (3), Abdul Wahid, N., Daud, Z. & Ahmad, S. (2011). Kesan pewartaan zakat ke atas Kepatuhan membayar zakat di Baitulmal : Kajian kes zakat pendapatan di Acheh. Paper presented at Persidangan Kebangsaan Ekonomi Malaysia ke VI (PERKEM VI) icmrrjournal@gmail.com

6 Ahmad, S. & Wahid, H. (2005a). Persepsi agihan zakat dan kesannya terhadap melalui institusi formal. Jurnal Ekonomi Malaysia 39, Pembayaran zakat Ahmad, S. & Wahid, H. (2005b). Sumber zakat : Perluasan harta yang diikhtilaf. JurnalSyariah, 13 (1), Ahmad, S., Wahid, H. & Mohamad, A. (2006). Penswastaan institusi zakat dan kesannya terhadap pembayaran secara formal di Malaysia. International Journal of Management Studies 13 (2), Bidin, Z., Md. Idris, K. & Mohd Shamsudin, F. (2009). Predicting compliance intention on zakah on employment income in Malaysia : An application of reasoned action theory.jurnal Pengurusan 28, Ibrahim, P. (2008). Pembangunan ekonomi melalui agihan zakat : Tinjauan empirikal. Shariah Journal 16 (2), Kadri, Z., Ahmad, S. & Mohd Noor, M.A. (2012). Zakat sebagai pemangkin pembangunan ekonomi : Ke arah negara berpendapatan tinggi. Paper presented at Persidangan Kebangsaan Ekonomi Malaysia ke VII (PERKEM VII). Md. Idris, K. (2006). Kesan persepsi undang-undang dan penguatkuasaan zakat terhadap gelagat kepatuhan zakat pendapatan gaji. Journal of ethics, legal and governance, (2), Saad, R. A. J., Md. Idris, K. & Bidin, Z. (2009). Peraturan pembayaran zakat kepada institusi zakat : Sikap peniaga dan kesannya terhadap gelagat pembayaran zakat perniagaan. Shariah Journal 17 (3), Wahid, H., Ahmad, S. & Abdul Kader, R. (2009). Pengagihan zakat oleh institusi zakat kepada lapan asnaf : Kajian di Malaysia. Paper presented at Seminar Kebangsaan Ekonomi Islam 2008/ icmrrjournal@gmail.com

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