Zakat malaysia

Seminar on Accountability and Transparency of Zakat Institutions

Current Development in Zakat Institutions

Presented at International Institute of Advanced Islamic Studies

Assoc Prof Dr Abd Halim Mohd NoorDirector, CIPSF9th August 2016

TABLE OF CONTENT

ZCD Gap, World Zakat Forum, Bogor, Indonesia, 19-21 July, 2011

2

• INTRODUCTION

• MANAGING ZAKAT FUND

•ZAKAT INSTITUTIONS IN MALAYSIA

•ZAKAT COLLECTION-DISTRIBUTION GAP

•CONCLUSIONS

• Prophet (Pbuh) as narrated by Ibn Umar:

• Islam is based on five principles: "to testify that there is no god but Allah and that Muhammad is His Prophet, to offer the regular prayers, to pay zakat (obligatory charity), perform hajj and to observe the fast during the month of Ramadan."


3

Concept of Primary and Secondary Accountability in Zakat Management

Zakat Management

Allah

Zakat Recipients

(Accountee)

Zakat Payers

(Accountee)

Primary

accountability

Secondary

accountability

Secondary

accountability

PRINCIPLES DISTRIBUTION OF ZAKAT

Rightful recipients

PrioritizationDistributing as soon as possible


5

RIGHTFUL RECIPIENTS

“The alms are only for

the poor, the needy, and those who collect them, and those whose hearts are to be reconciled (mu'allaf), and to free the captives and the debtors, and for the cause of Allah, and for the wayfarers;

a duty imposed by Allah. Allah is Knowing, Wise”

• Surah al-Taubah (9): 60


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PRIORITY IN DISTRIBUTION

•NEED–Distribution based on need. It includes the poor, needy,

slaves, debtors and ibn sabil.

•NURTURING & ENCOURAGEMENT–Distribution based on nurturing and encouragement of

religious beliefs and morals. It includes convert and fi-sabilillah.

• INCENTIVES & MOTIVATION–Distribution based on incentives and motivation such as

amil.


7

PRINCIPLES OF MANAGING ZAKAT FUND

GOVERNANCE

ASNAF REQUIREMENT

ORGANIZATION


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PRINCIPLES OF MANAGING ZAKAT FUND: ORGANIZATION

Trust

All proceeds of zakat is a trust in the hands of management that must be distributed to the recipients

Inclusive

The collection of zakat to be distributed to all rightful recipients/asnaf

Fair

The proceeds should be distributed fairly to all asnaf. However, for any fund that is not spent, the fund can be transferred to other asnaf, in order of importance.


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PRINCIPLES OF MANAGING ZAKAT FUND: ASNAF REQUIREMENT

Haddul kifayah

Zakat should be given at a rate sufficient to every individual in the asnaf.

Selected

The collection of zakat is for certain groups as determined by Islamic law to the eight asnaf of zakat

Immediately

Amil or organization shall immediately implement the distribution after it identify valid recipients.

Preference

The distribution of zakat to be implemented according to priorities of the fakir, the poor and amil.


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PRINCIPLES OF MANAGING ZAKAT FUND: GOVERNANCE

Control

All distribution of zakat to be done with careful monitoring and control.

Accountable

Amil is responsible for zakat collected and distributed

Transparent

The collection of zakat and zakat distribution to be set and audited


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• Measuring performance broaden concept of accountability in NPO

• Commitment to accountability and transparency is important in gaining public trust and confidence

• A transparent institution disclose their performance and efficiency to stakeholders

Zakat Institutions Organizational Structure

Perlis, Johor, Terengganu, Kedah,

Perak, Kelantan

Baitulmal

Collection

Distribution

FT, Melaka, NS, Pahang

Baitulmal

Distribution

Corporate Zakat

Collection

Selangor, Penang, Sarawak, Sabah

Corporate Zakat

Collection

Distribution

ZAKAT COLLECTION IN MALAYSIA, 1991-2010


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FACTORS INFLUENCING ZAKAT COLLECTION

• Awareness on paying zakat

• Zakat on income

• Tax rebate

• Professional approach towards the management of zakat collection

• Modernization and corporatization

AVERAGE PERCENTAGE OF ZAKAT DISTRIBUTED, 2003-2010

Average Zakat Fund Distributed in Malaysia, 2009-2013* (%)

ZAKAT COLLECTION & DISTRIBUTION IN MALAYSIA, 2009-2013

Zakat Distribution by Asnaf , 2013 (%)

ZAKAT DISTRIBUTION IN MALAYSIA

• Retention of zakat fund

• Zakat organizations on average distributed 77% of their zakat fund i.e. 23% of zakat fund were not distributed within the same year (2003-2010)

• Erratic pattern in disbursing zakat fund among states.

• Asnaf fisabilillah received the highest portion

ISSUES IN EFFECTIVENESS OF ZAKAT ORGANIZATIONS

• Requires analyses from several dimensions.

• Zakat Collection

• Zakat Distribution

• Impact of zakat on asnaf

• Outcomes of program

• Non recipients of zakat fund (NRZF)


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• Problems of perception of zakat institutions

• Performance of ZIs differed among states – is it due to organizational structure?

• Problem of understaffing

• All ZIs have audited financial reports (pg 108)

• All ZIs have good financial control practices

• Fiduciary responsibility – Financial control and effective management of resources are crucial areas for non-profit organization governance

No

.

States Transparency checklist Total

points

Grade

Administrat

ive official

B S Au AR I A

c

CI C S

1. NS / / / / / x x / / 8 B

2. Kedah / / / / / / /

2002-

2014

/ / 10 A+

3. Pahang / / / / / / x / / 9 A-

4. Perlis / x / /

Not

deta

il

/

Not

detai

l

/

x x / 7 B-

5. Johor / / / /

Not

deta

il

/

Not

detai

l

x x / / 8 B

6. Melaka / / x /

Not

deta

il

/

x x / / 7 B-

7. Penang / / / / / x x / / 8 B

8. Perak / / / / / x x / / 8 B

9. Kelantan / / / /

Not

deta

il

/

Not

detai

l

/ x / / 9 A-

10. Sarawak / / /

Not

deta

il

/

Not

detai

l

x x / / 8 B

11. FT / / / / / / /

2007-

2014

/ / 10 A+

12. Selangor / / / / / / /

2011-

2014

/ / 10 A+

13. Sabah

Website is

under

constructio

n

- - - - - - - - - - -

14. Terenganu / / / /

Not

deta

il

/

Not

detai

l

x x / / 8 B

Audit : 6 ZI

Annual

Report: 3 ZI

have annual

report on

websites

ZAKAT COLLECTION-DISTRIBUTION GAP (ZCD)

• Simple indicator of zakat fund management.

• Persistent existence of ZCD gap is a probable indication of a weakness in the distribution system of zakat.

• Continuation of gap raised the questions of :

– poverty,

– missed economic and education opportunities,

– inadequate assistance,

– denied access to zakat funds, among others.


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GAP IN ZAKAT COLLECTION &

DISTRIBUTION (2009-2013)

2009 2010 2011 2012 2013

Zakat Collection

1,968,871,789.60 1,363,772,680.87 1,922,863,408.05 1,641,119,093.83 2,258,024,426.94

Zakat

Distribution1,020,752,116.58 1,176,487,211.95 1,498,236,592.73 1,338,348,220.32 1,687,713,262.45

Undistributed

948,119,673.02 187,285,468.92 424,626,815.32 302,770,873.51 570,311,164.49

%

48.16 13.73 22.08 18.45 25.26

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Source: PPZ (2015)

Incidence of Poverty in Malaysia (2002-2012)

2002 2004 2007 2009 2012

Malaysia 6.0 5.7 3.6 3.8 1.7

Ethnic:

Bumiputera 9.0 8.3 5.1 5.3 2.2

Chinese 1.0 0.6 0.6 0.6 0.3

Indians 2.7 2.9 2.5 2.5 1.8

Others 8.5 6.9 9.8 6.7 1.5

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Source:http://www.epu.gov.my/

DIFFERENCE IN STATISTICS OF HARDCORE

POOR AND POOR IN MELAKA

Data eKasih Zakat Applications (2013)

Hardcore poor Poor Out of Poverty TOTAL

0 1210 8531 9741

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Hardcore Poor TOTAL

260 8424 8684

Statistics of Hardcore Poor and Poor in Melaka from eKasih

Statistics of Zakat Recipients (Hardcore Poor and Poor) in Melaka

FACTORS INFLUENCING ZCD GAP

• Paying zakat at the end of the year. Significant percentage of collection were collected in the final weeks of a year.

• Proposed distribution budget consistently lower than actual collection

• Inability of some sections or departments within zakat organizations to fully utilize the allocated fund

• Understaffing

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IMPLICATIONS OF ZCD GAP

• Issues of trust and rights of the asnaf to zakat fund set aside for them.

• Denying the access to fund affects asnaf, most of whom are vulnerable and marginalized sections of the ummah.

• Contributes to the existence of NRZF i.e. rightfully asnaf denied to zakat fund,

• Inadequate assistance, missed economic and education opportunities among the asnaf. These will lead to asnaf lingering in vicious cycle of poverty at the expense of zakat fund not being made accessible to them.


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Enhancing Zakat Distribution

Ensuring zakat fund distributed

within a specified

time period

Identifying the eligible recipients obtain zakat

Ensuring zakat fund properly allocated to just program

Ensuring zakat fund is effectively used

Current Development in Zakat Governance

• Zakat Core Principles – Proposed Core Principles for Effective Zakat Supervision –IRTI, BAZNAS, BI, representatives from ZIs –PPZ, LZS, CIPSF

• International Standard for Zakat Management – World Zakat Forum

RECOMMENDATIONS & CONCLUSIONS

• Improved budgeting procedures for zakat fund distribution

• Introduce 5 year budget distribution plan

• Advance from Baitulmal and other sources for any temporary deficits

• Improved delivery system

• Improved governance


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Wallahualam

Terima Kasih

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Zakat malaysia