Analysis of Governance and Efficiency on Zakat Distribution: Evidence From Indonesia

Abstract

This study analysesand identifies the governance factor(s) that influence zakat disbursement efficiency for Indonesia’s National Zakat Board (BAZNAS)in four district of Central Java Province, namely Banyumas, Purbalingga, Banjarnegara, and Kebumen. This research examines how the zakat institution in Indonesia has improved in terms of disbursement activities over the past 5 years (2011-2015).This is a quantitative research study that uses two approaches of efficiency analysis, namely (i) zakat disbursement efficiency measurement (ratio analysis) and (ii) identification of governance factor(s) that influence the zakat disbursement efficiency of the zakat institutions (regression analysis). Eviews 9 was used in data calculation. In the first approach, there are three efficiency measures: disbursement efficiency, cost efficiency and time efficiency. In the second approach, governance factors (board size; professionals on board; and frequency of board meetings) identify the influence of governance factors on zakat disbursement efficiency measures. The findings showthat there is a negative influence between board size and cost efficiency and no influence with disbursement and time efficiency. However, the relationshipbetween board size and disbursement and time efficiency is rejected because of insignificant results. Professionals on boards has a positive influence on disbursement, cost and time efficiency. Lastly, the frequency of board meetings positively influences disbursement efficiency and time efficiency. Frequency of board meetings showed a negative influence with cost efficiency. This research is significant as it could contribute to future discussions on the potential ways to improve zakat governance and efficiency in Indonesia. The outcomes from the discussions will be useful as a guide for policymakers looking to improve the zakat institution’s governance system.
 
 Keywords:Efficiency, Governance, Indonesia, Zakat

Research on Zakat Governance

“…For the keyword distribution, an example of his research is Mubtadi & Susilowati (2018) analyzing the governance and efficiency of zakat distribution in Indonesia. The results of this study indicate that there is a negative effect between board size and cost efficiency and no effect with disbursement and time efficiency.…”

The Evaluation of Zakat Index Literatures

“…(Al-Ayubi et al, 2018) explained that Indonesia Zakat Institutions have many challenges with socialization expenses, volunteer numbers, zakat collection, and type of zakat distribution, which lowers their intermediation function. (Arkham Mubtadi & Susilowati, 2018) found that board size and cost efficiency negatively affect zakat distribution in Indonesia, while disbursement and time efficiency do not. Based on the explanation above, several factors can affect the efficiency of zakat distribution, including technical issues, evaluation programs, interaction design, the cost of socializing zakat, the number of volunteers, and the selection of zakat distribution type.…”

Zakat Distribution Management: A Systematic Literature Review

“…Behind the implementation of the zakat distribution process, human resources involved in zakat fund management have a crucial role in its efficiency. In the study by Mubtadi and Susilowati (2018), it is explained that besides professionalism among zakat institution managers, their roles in the zakat institution have a positive influence on distribution efficiency [31]. These parties need to hold strategic meetings and discussions, as mentioned by Kholis et al (2013) in the study by Mubtadi and Susilowati (2018), that increasing the number of board meetings can reduce cases of zakat fund misuse [31].…”