Efficiency of zakat institutions in Malaysia and its determinants

Zakat is one of the five basic pillars in Islam It is an obligation of Muslims to give a specific amount of their wealth (with certain conditions and requirements) to beneficiaries called al-mustahiqqin with the main objective of the achievement of socioeconomic justice. Zakat institutions are trust...

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Main Authors:	Abd. Wahab, Norazlin, Abdul Rahman, Abdul Rahim
Format:	Conference or Workshop Item
Language:	English
Published:	2011
Subjects:	BP173.75 Islam and economics HB Economic Theory
Online Access:	http://irep.iium.edu.my/14736/ http://irep.iium.edu.my/14736/1/220.pdf

id	iium-14736
recordtype	eprints
spelling	iium-147362012-03-06T00:15:50Z http://irep.iium.edu.my/14736/ Efficiency of zakat institutions in Malaysia and its determinants Abd. Wahab, Norazlin Abdul Rahman, Abdul Rahim BP173.75 Islam and economics HB Economic Theory Zakat is one of the five basic pillars in Islam It is an obligation of Muslims to give a specific amount of their wealth (with certain conditions and requirements) to beneficiaries called al-mustahiqqin with the main objective of the achievement of socioeconomic justice. Zakat institutions are trusted bodies that manage zakat in Muslim countries. In Malaysia, such zakat institutions are State Islamic Religious Councils (SIRCs). The institutions are expected to play a key role in promoting the socio-economic objectives of zakat in Malaysia. Thus, it is of prime importance that these institutions are being managed effectively and efficiently. The purpose of this paper is to analyze the efficiency of zakat institutions in Malaysia. This study uses Data Envelopment Analysis (DEA) method to estimate zakat efficiency and Tobit model to determine the efficiency of zakat institutions in Malaysia. We use three different types of DEA model which are technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE) Model. The data consist of a panel of fourteen State Islamic Religious Councils (SIRCs) in Malaysia during the period of 2003 to 2007. Further, Tobit Analysis is utilized in the second stage to determine factors that influence the efficiency of zakat institutions in Malaysia. During the study period, our results suggest that pure technical inefficiency rather than scale inefficiency has resulted in the zakat institutions inefficiency. This could be due to inability of the institutions in using the technology available to collect more zakat collection and distribute it to the recipients. Examination of the return to scale revealed that more than half of zakat institutions in Malaysia were scale inefficient (operating at DRS or IRS). The empirical findings suggest that zakat payment system, computerized zakat system, board size, audit committee and decentralization significantly affect efficiency of zakat institutions in Malaysia. 2011 Conference or Workshop Item NonPeerReviewed application/pdf en http://irep.iium.edu.my/14736/1/220.pdf Abd. Wahab, Norazlin and Abdul Rahman, Abdul Rahim (2011) Efficiency of zakat institutions in Malaysia and its determinants. In: 8th International Conference on Islamic Economics and Finance, 19-22 December 2011, Qatar National Convention Center, Doha Qatar.
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	BP173.75 Islam and economics HB Economic Theory
spellingShingle	BP173.75 Islam and economics HB Economic Theory Abd. Wahab, Norazlin Abdul Rahman, Abdul Rahim Efficiency of zakat institutions in Malaysia and its determinants
description	Zakat is one of the five basic pillars in Islam It is an obligation of Muslims to give a specific amount of their wealth (with certain conditions and requirements) to beneficiaries called al-mustahiqqin with the main objective of the achievement of socioeconomic justice. Zakat institutions are trusted bodies that manage zakat in Muslim countries. In Malaysia, such zakat institutions are State Islamic Religious Councils (SIRCs). The institutions are expected to play a key role in promoting the socio-economic objectives of zakat in Malaysia. Thus, it is of prime importance that these institutions are being managed effectively and efficiently. The purpose of this paper is to analyze the efficiency of zakat institutions in Malaysia. This study uses Data Envelopment Analysis (DEA) method to estimate zakat efficiency and Tobit model to determine the efficiency of zakat institutions in Malaysia. We use three different types of DEA model which are technical efficiency (TE), pure technical efficiency (PTE) and scale efficiency (SE) Model. The data consist of a panel of fourteen State Islamic Religious Councils (SIRCs) in Malaysia during the period of 2003 to 2007. Further, Tobit Analysis is utilized in the second stage to determine factors that influence the efficiency of zakat institutions in Malaysia. During the study period, our results suggest that pure technical inefficiency rather than scale inefficiency has resulted in the zakat institutions inefficiency. This could be due to inability of the institutions in using the technology available to collect more zakat collection and distribute it to the recipients. Examination of the return to scale revealed that more than half of zakat institutions in Malaysia were scale inefficient (operating at DRS or IRS). The empirical findings suggest that zakat payment system, computerized zakat system, board size, audit committee and decentralization significantly affect efficiency of zakat institutions in Malaysia.
format	Conference or Workshop Item
author	Abd. Wahab, Norazlin Abdul Rahman, Abdul Rahim
author_facet	Abd. Wahab, Norazlin Abdul Rahman, Abdul Rahim
author_sort	Abd. Wahab, Norazlin
title	Efficiency of zakat institutions in Malaysia and its determinants
title_short	Efficiency of zakat institutions in Malaysia and its determinants
title_full	Efficiency of zakat institutions in Malaysia and its determinants
title_fullStr	Efficiency of zakat institutions in Malaysia and its determinants
title_full_unstemmed	Efficiency of zakat institutions in Malaysia and its determinants
title_sort	efficiency of zakat institutions in malaysia and its determinants
publishDate	2011
url	http://irep.iium.edu.my/14736/ http://irep.iium.edu.my/14736/1/220.pdf
first_indexed	2023-09-18T20:23:54Z
last_indexed	2023-09-18T20:23:54Z
_version_	1777408288590135296

Efficiency of zakat institutions in Malaysia and its determinants

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