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SOCIAL WELFARE: IMPROVEMENT OF ZAKAT DISTRIBUTION SYSTEM IN

MALAYSIA

GROUP MEMEBERS:

Boubakary Wadjiri Abdoulaye 0919809

Hamse abdillahi abdi 0830515

Osamah hamoud abdo 0917733

SECTION 1

PREPARED FOR : Abdul Rahman Ahmad Dahlan


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Abstract

Zakat helps closes the gap between the rich and the poor in society. It caters the Muslims welfare especially the

poor and needy as to minimize economic inequalities. When the poor and needy receive the financial aids from

zakat institution, they have better opportunities to uplift themselves to higher socio-economic levels. On the

other hand, the non recipients are left out from these opportunities. This study will focus on the non recipients of

zakat fund (NRZF). The poor and needy that were left out were classified into three groups, namely: i)rejected applicants of zakat fund based on administrative criteria rather than economic or had kifayah

criteria; ii) ignorance on the availability of zakat fund and iii) refuse to request or accept zakat fund for

personal reasons. The study aim is to get clear picture of the NRZF phenomenon and the determinants that

contribute to the issue. Further analysis on economic inequalities in term of social, economy and financial

disparity on NRZF is also the interest of this study. The determinants of the NRZF act as guidelines for the policy

makers and zakat agencies in planning poverty eradication programs especially for Muslim.

Key words: Zakat, poor and needy, determinants, non recipients of zakat fund(NRZF)

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1. Introduction

Zakat is an obligatory tax levied by Allah to the Muslim community as one of the tools to help the poor. Zakat

takes surplus wealth from those who have it and distribute it to the poor and needy. The contribution is only 2.5

per cent of the wealth to be share with the poor and needy (Abd Halim, Shawal, Ahmad & Kamil,2010). Zakat

helps bridge the gap between the rich and the poor in society.


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Zakat is the third pillars in Islam fundamental ibadah, serves not only religious objectives but includes socio-

economic objectives such to promote economic growth and productivity, to meet the consumption demand, to

finance projects and for equitable distribution wealth.

Zakat is for the poor, and the needy and those who are employed to administer and collect it, and the

new converts, and for those who are bondage, and in debt and service of the cause of Allah, and for

the wayfarers, a duty ordained by Allah, and Allah is the All-Knowing, the Wise". Qur'an (9:60)

There are eight category of zakat recipients (asnaf) as mentioned in the holy Quran(At Tawbah:60); 1)The

destitute or indigent (Fakir): Those who don't have material possessions nor means of livelihood, 2) The

Poor(Miskin): Those with insufficient means of livelihood to meet basic needs, 3) The Indebted(Al Gharimin):

Those who are in debt and have difficulty repaying it, 4) Stranded Traveller (Ibnu sabil): The traveller who does

not have enough money to complete their journey,5) To Free Slaves(Al Riqab): Zakat money is to be used to

purchase slaves and free them, 6) New Muslims or Convert (Muallaf) : Those who are new to Islam and require

help to integrate themselves into the Muslims community, 7) In the Path of Allah(Fisabillah): Zakat money can

also be spent in the path of Allah. This can include many things, basically any project that helps Muslims or Islam

and 8) Zakat Workers(Amil): Those whose job it is to collect and redistribute zakat money get their salary from

the zakat money.

In principle, the destitute and the poor should have the priority to receive the zakat aid. Therefore, the zakat

institution has responsibility to ensure the zakat recipients especially the destitute and the poor could attain a

minimum quality of life from zakat received. Zakat distribution should be proper and transparent to attain

equitable distribution of wealth among Muslim society (Mahyuddin & Abdullah,2011).

Zakat distribution divided in two forms: 1) direct financial for those who are not productive because they are not

capable of working and 2) support to help the recipients sustain themselves in the form of capital,tools and

equipment to enable them to run activities that can support their living and can be pulled out of poverty

(Mahyuddin & Abdullah,2011).

Although the contribution of zakat is only less than 1% compared to nations Gr

oss Domestic Production(Mozef,1999), but zakat play an important role in providing necessities and social survival to the poor

people.The main objective of zakat is to eliminate poverty and is parallel with the governments fourth NKRA in

Governemnt Transformation programs(GTP), to improve the standard of living low income. Financial aids from

zakat institution provide opportunities to uplift themselves to higher socioeconomic levels.

Some of empirical study done by Patmawati (2006) in Selangor and Zakariah et.al (2010) in Kelantan, Malaysia;

Nasim Shah Shirazi & Md.Fouad in OIC-member countries, M.Kabir & Juanyed (2007) and Ahmed(2004) in

Bangladesh and Irfan (2009) in Indonesia agreed that zakat distribution reduces poverty incidence, reduces the

extent of poverty and lessens the severity of poverty.

The aim of zakat is to lessen the burden of the asnaf especially regarding their basic needs and additionally, todiscourage dependency of asnaf on zakat aid in long term. The zakat funds can be utilized and used as long

term investment for socioeconomic development in the country with consideration on the well being of asnaf.

The Muslim society is interested to see how many poor families and individuals are elevated from poor to being

able to live a decent life or even to a situation where they are able to pay zakat to other poor individuals. The

effectiveness also involved how the development programs for asnaf successfully transform the mustahiq (zakat

recipients) to muzzaki (zakat payees).


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Munim (1997) cited in (Mahyuddin & Abdullah,2011:239) sustain that zakat is an obligatory medium to aid

Muslims in four aspect: to resolve poverty issue, to establish social justice, to develop a society based on love,

mutual solidarity, brotherhood and to purge the poor feelings of hatred and animosity that they might have for

the rich.

In Malaysia, zakat collection is managed by zakat institutions under the jurisdication of the State Council (Majlis

Agama Islam Negeri-MAIN)and each state managed the zakat funds different ways such as Selangor, Pulau

Pinang and Sarawak have privatised zakat collection and distribution. The other states such as Wilayah

Persekutuan, Negeri Sembilan, Melaka and Pahang only privatised zakat collection. The other states managed by

Majlis Agama or Jabatan Agama Islam Negeri (Zakat Centre Report)

This paper is organized as follow. The immediate section outlines the definition and measures economic

inequalities and next, the discussion on economic inequalities relates to Malaysias situation. Subsequently, the

discussion of the issue of Non Recipients of Zakat Fund (NRZF). The final section analyzed the determinants of

NRZF. The paper ended with conclusion of the issue.

2. Malaysian situation now :Since independence in 1957, Malaysia Government set to achieve faster economic growth, lower rate of

economic instability, lower unemployment, lower rate of poverty and more equitable distribution income and

wealth (ISIS,2011). Malaysia continues to seek for the solution for economic and social inequality especially

among different ethnic groups. Different micro(households) and macro(nation) level policies and strategies had

been adopted in the past to reduce income inequality and poverty. The most important policies that had big

impact in reducing poverty in Malaysia was the New Economic Policy (NEP) 1971-1990; the National

Development Policy (NDP) 1991-2000 ,the National Vison Policy(NVP) contained in the Third Outline Perspective

Plan for 2001-2010 and Economic Transformation Programme(ETP) in 10th Malaysia Plan.

Malaysias government is aiming for Malaysia to become a high-income nation that is both inclusive and

sustainable by 2020. Malaysia's Gross National Income (GNI) will lift to US$523 billion by 2020, and raise per

capita income from US$6,700 to at least US$15,000, meeting the World Bank's threshold for high income nation.

It also projected that Malaysia will be able to achieve the targets set if GNI grows by 6% per annum (PEMANDU,

2010). Malaysias transformation from low-income countries to high-income countries such as in the plan is

very exciting, but the poor will still need to provide assistance either in terms of basic needs or to improve the

standard of living if not, these people will left behind from the development. Nevertheless, the nation s wealth

has little impact on the poor families and they may have not benefited in the share of economic cake.

The Ninth Malaysia Plan (9MP) sets out the aim Malaysias effort to improve income distribution focusing

income disparity between Bumiputera and non Bumiputera ethnic groups and between rural and urban areas

(UNDP,2008;p81). Income inequality can be measured by the differences between the highest and lowest

income, the mean, the coefficient variation, the Kuznets income ratio and the most widely used is the Gini

coefficient. Gini coefficients values lies between zero(perfectly equality) and one (perfectly inequality),

therefore the nearer the Gini coefficient to the value of 1, the more income inequality likely occurred

(UNDP,2008;p87).

3. Issue of Non Recipients of Zakat Fun(NRZF)

Even though, the increases in collection of zakat, half or fourteen of zakat institutions averaged less than 80% of

zakat fund being distributed for the period of 2003-2010. Zakat fund were constantly not fully distributed. For


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the period of 2003-2010, zakat institutions on average distributed 77% of their zakat fund i.e. 23% of zakat fund

were not distributed within the same year. Details of zakat distribution in various states revealed erratic pattern

in disbursing zakat fund. A zakat organization may register a high percentage of disbursement the previous year,

but similar pattern couldnt be observed the following year. Difference in percentage disbursement can be as

large as 40% compare to the previous year (PPZ-MAIWP, 2010) as shown in the below diagram:

The undistributed zakat fund relates to the Non Recipients of Zakat Fund(NRZF) issue. It will reflect the integrity

of zakat centre in terms of zakat distribution to eligible asnaf and also effects future zakat collection. Though

many studies have been undertaken on the impacts of zakat on asnaf, there is little research done on NRZF as

potential asnaf but do not have access to zakat fund. Inaccessibility is due to administrative ineligibility,

ignorance and voluntary exclusion of the indigents and the poor. This phenomenon and the inability to disburse

zakat fund timely contributed to the ineffectiveness of zakat fund distribution.

The issue of undistributed zakat funds lead to serious concern of zakat payees regarding how their zakat been

distributed to eligible asnaf. (Abd Halim et.al,2010). The study also identified evidence of ineffectiveness in the

distribution of zakat funds. The ineffectiveness obtains due to some the rights of the asnaf being turn down and

collected zakat funds were not fully allocated.

The issue such as bureaucracy, weakness in identifying the poor, effective zakat distribution system and zakatinstitute transparency rise the incidence where the indigents and poor tend to seek and accept the other

religious bodies to get financial aid. Being helpless, the indigents and poor willing to convert to the other

religion just to fulfil their basic needs. The zakat institute again being pointed for not identifying the poor and

needy. Furthermore, the zakat distribution also being questioned as zakat payees are concerned on how thezakat had been distributed. Study by Maliah Sulaiman (2003) in Nor Azzah & Nor Aini (2010) stated thatimportance of zakat institution to imply integrity in publicizing information pertaining collection and distribution ofzakat to the public. This will ensure there is no leakage or dropouts during zakat distribution to the deservedasnaf. The trust from the society is important to lessen the tendency to pay zakat directly to asnaf or payingthrough imam and this impact on the performance of zakat institution.

Figure 3 illustrates the average percentage of zakat fund distributed between 2003-2010 among 14 states in

Malaysia. An average of 77% of the zakat fund were distributed and the remain 23% were not distributed.

Negeri Sembilan showed the highest zakat fund distributed but Sarawak and Pahang on the other hand showed

the lowest zakat fund distributed, lower than 50%. Even though Sarawak and Pahang are the first and second

largest states in Malaysia but the zakat distribution is still low in both states. Geographical problem is one of the

factor contribute to this low percentage of zakat distribution. Study by Abd Halim, Rawi & M Sulaiman(2010)

expressed that the continual gap between zakat collection and distribution connect to the weakness of

distribution process and mechanism of zakat fund.


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One of the main purposes of zakat fund is to help the poor and needy. When they receive the financial aids from

zakat institution, they have better opportunities to uplift themselves to higher socioeconomic levels. On theother hand, the non recipients are left out from these opportunities; the questions are they really not qualified

to receive the fund? or ineffectiveness in zakat management occur especially in the process selecting the

recipients? or others determinants of the non recipients of zakat funds.

This paper focuses on the determinants of those who were left out, voluntarily and involuntarily, from zakat

fund. The poor and needy that were left out were classified into three groups, namely: i) rejected applicants of

zakat fund based on administrative criteria rather than economic or had kifayah criteria, such as place of origin;

ii) ignorance on the availability of zakat fund and iii) refuse to request or accept zakat fund for personal reasons.

Exclusion of these groups from zakat fund compromised the objective of zakat institutions and jeopardized

poverty eradication measures.


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4. The Determinants of NRZF

Based on previous research and literature review regarding issues on zakat distributions and poverty, there are

six determinants should be taken into consideration in this issue of non recipients of zakat fund (NRZF), namely

A) Inaccurate data base on asnaf

Muhammad Syukri (2006)found that there was evidence of inaccurate data base on asnaf. The data base wasnot update and those asnaf that have successful elevated from poverty is still in the list.

Mohamed Saladin,Arifin & Mohd Fauzi (2010) assured that muslim society is keen to know the number of poor

families that are able to live decent life and moreover, they have better income now and can contribute to pay

zakat. Nonetheless the study on these aspects is missing and one of the reasons is the weakness in identifying

the poor.

B) Bureaucracy problems

Issue of bureaucracy in most state in Malaysia arise the problem to asnaf that would like to apply for zakat

funds. The asnaf has to fill the form as the procedures before the zakat institution consider their application.

C) Problems in identification of potential asnaf

A study by Abd Halim et.al (2010) identified proof of zakat distribution ineffectiveness. The ineffectiveness arises

due to some asnaf being denied their right to zakat. The staffs of zakat institution are advised to go around

looking for eligible asnaf. The zakat institution also must be transparent in identifying the asnaf and also based

on merit. Feedback from respondent in Terengganu even argued that some eligible asnaf was denied of the

rights to get the zakat (IKaZ, 2010). Redefinition of asnaf should be considered although the eight category of

asnaf is still maintained. As Selangor Zakat Board (Lembaga Zakat Selangor) redefines asnaf faqir as Muslims that

have no wealth at all gained from permissible job to fulfill their needs and the family including shelter, food,

clothing, medicine and transport (Lembaga Zakat Selangor, 2010)

In order to design a poverty reduction intervention, an implementing agency such as zakat institution needs tobe clear about the definition of poverty and the way in which poverty is to be measured. Without a clear

understanding of what poverty is, and how it is measured, any new interventions will lack of focus on helping

those in the most need.

D) Ignorance by asnaf

From the survey done by Abd Halim et.al(2010) identified that the understanding of zakat among the asnaf

varied and asnaf fakir are stated the lowest understanding on zakat. The ignorance by asnaf might be they are

not aware on how to apply for zakat, either the promotion from zakat centre are not good enough to provide

them with adequate information or even the asnaf have varies personal reasons for not apply for zakat. The

personal reasons to this ignorance somehow relates to the difference hierarchy of human needs, if the asnaf

valued the other determinants such as five basic needs in individuals life known as Maqasid al-Syariah: the

purity of religion(al-din), the protection of life(al-nafs), the importance of mind (al-aql), the protection of

dignity(al-nasb) and the security of own property (al-mal).(Sanep & Rosbi,2010) and (Rosbi & Sanep,2010) are

more important may be their view on being poor would be different.

E) Attitude of amil

Mohamed Dahan (1998) stated that some negative cases, such as breach of trust, unfair distribution, abuse of

zakat funds, inefficient management and distribution methods lead to dissatisfaction among society.

Sanep et.al (2006) proved that 10.5% of the zakat payees tend to pay directly to asnaf even though the zakat

collection has been privatized. This study also showed that 57.1% of the zakat payees were unsatisfied with thezakat distribution by the zakat centre.


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F) Geographical problems

The difficulties to reached (geographical problems) and identified by the amil caused the potential zakat

recipients left out from receiving zakat. This is due to the asnaf houses spread in the village, district or state (

Muhammad Syukri ,2006).

Bradshaw(2006)relates poverty caused by geographical disparities to economic agglomeration theory that

explained competitive areas attract business clusters but drawing away from impoverished communities. Thelack of infrastructures for human resource development also limits economic activities. This will explain the

difference of rural-urban inequality.


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5. Conceptual Model

The issue of undistributed zakat funds will lead to misperception towards the integrity of zakat centre in

distributing the funds to the eligible asnaf as zakat funds priority are for the indigent and poor families (asnaf

fakir and miskin). If people have negative perception on zakat distribution, it will also effect to the zakat

collection as they tend to pay zakat directly to the asnaf,thus the function of zakat centre will be questioned. It

will affect the whole zakat performance.

The IKaZ Model proposed by Abd Halim, Shawal, Ahmad & Kamil (2007) stated four dimensions: output, input,

process and quality as performance indicator to assist in providing accurate information on the performance of

an organization. This model had been implemented to measure performance in zakat institutions in Malaysiasince 2000 and had won gold medal in Invention, Innovation and Design (IID) 2007 at national level and bronze

medal at international level in International Exhibition (ITEX) 2007.

In the model, Output refers to end product in zakat distribution. It involves an objective measurement such

as list of those asnaf that successfully out of the poverty line, decrease poverty rate, poverty gap and income


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gap. Input refers to the management of zakat fund from the perspective of asnaf, staf and institution.

Process includes the process of identifying the asnaf. Quality is the measurement of zakat performance.

There are six determinants on zakat distribution effectiveness identified by Abd Halim et.al (2007) as illustrate

in the figure below. Unfortunately, the issue that have been highlighted, NRZF will be intervened the

smoothness of zakat performance. The NRZF acts as a moderating variable that will impact the zakat

performance.

6. Conclusion

Exclusion of these groups from zakat fund compromised the objective of zakat institutions and jeopardized

poverty eradication measures. Identification of the determinants contributes to further enhancement of

institutional zakat management in both zakat distribution as well as zakat collection.

Issue of undistributed zakat would reflect the effectiveness of zakat collections and performance. Additionally,

the zakat payees are concern whether their zakat received by the eligible asnaf and the percentage of

undistributed zakat funds will reflect how effective the zakat distribution in terms to reach the potential

recipients of zakat funds. The study of Non Recipients of Zakat Funds (NRZF) seeks to identify determinants that

contribute to the issue. Furthermore, it is important to recognize the determinants of NRZF, as guidelines for the

policy makers and zakat agencies in planning poverty alleviation programs especially for Muslims in malaysia.

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