localization of zakat distribution, religiosity, quality … kerja/miicema unsri-35... · ·...

PROCEEDING The 13th Malaysia Indonesia Conference on Economics, Management and Accounting (MIICEMA) 2012

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LOCALIZATION OF ZAKAT DISTRIBUTION, RELIGIOSITY,

QUALITY OF LIFE AND ATTITUDE CHANGE1.

(PERCEPTIONS OF ZAKAT RECIPIENTS IN MALAYSIA)

Hairunnizam Wahid Lecturer

School of Economics, Faculty of Economics & Management

National University of Malaysia, 43600 Bangi, Selangor, MALAYSIA

Tel: +603-8921 3453 Fax:+603-8921 3453. E-mel: [email protected]

Radiah Abdul Kader (PhD)

Associate Professor

Department of Economics, Faculty of Economics & Administration

University of Malaya, 50603 Kuala Lumpur, MALAYSIA

Tel: +603-79673654, Fax:+603-79673738. E-mel: [email protected]

Sanep Ahmad (PhD) Associate Professor

School of Economics, Faculty of Economics & Management

National University of Malaysia, 43600 Bangi, Selangor, MALAYSIA

Tel: +603-89215778, Fax:+603-8921 5789. E-mel: [email protected]

Abstract

This study attempts to examine the relationship between proposed localization of zakat

distribution, the quality of life of the poor (zakat recipients) and their attitude towards becoming

zakat payers. This study starts on the premise that localization of zakat distribution adds

efficiency and hence helps alleviate poverty. It is also hypothesized that to achieve sustained

poverty eradication the zakat recipients should have a change in attitude to become zakat payers

in the long run. Two factors that can facilitate this change is improvement in their quality of life

and positive thinking nurtured by religiosity. Based on this framework, this study attempts to

test the relationship among variables involved. Structural Equation Modeling (SEM) is employed

using survey data on a sample of poor and needy zakat recipients in Peninsular Malaysia. The

study finds that zakat recipients have very good faith in their religion and majority has the desire

to change and move up to a higher socio economic status. Positive relationship is also found

between perceived zakat localization and improvement in the quality of life of the zakat

recipients.

Keywords: zakat localization, religiosity index, quality of life, the attitude of zakat recipients,

1 This paper is partly under the research grant UKM-GUP-JKKBG-08-03-009


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INTRODUCTION

Zakat collection keeps increasing from year to year which indicates high achievement of zakat

institutions in managing zakat. Total collection of zakat as a whole in Malaysia experienced a

tremendous increase of 220.6 per cent or from RM373 million in 2002 to RM1.196 billion in

2009 (Zakat Report 2009). This achievement is proof of good and successful strategies planned

by zakat institutions in each state. In 2009, from all 14 states in Malaysia, zakat collection in the

state of Selangor and Kuala Lumpur Federal Territory exceeded RM200 million followed by

Johor with more than RM100 million (Zakat Report 2009, p.75). The tremendous increase in

zakat collection from year to year is attributed to several reasons including increasing level of

awareness, knowledge and religiosity among the Muslim community on aspects of zakat, the

corporatization of zakat institutions especially in terms of collection, introduction of new

methods of payment such as salary deductions, payments through banks and other non-banks

financial institutions and also increasing payment of corporate zakat by companies. Thus zakat

collection is no more a major problem in the zakat system. However, many studies revealed

there was a major problem in zakat distribution as shown by the perception of zakat payers

(Mohamed Dahan, 1998; Muhammad Shukri, 2006; Sanep et.al, 2006; Hairunnizam et. al, 2009;

Hairunnizam et.al, 2010a) and academicians who indicated that they were not satisfied with the

current management of zakat distribution (Anuar Mohammad, 2008).

What can be concluded is the confidence level of zakat payers towards the role of zakat

institution in distributing zakat is still way far behind. This situation happened because they

might view directly or indirectly the living conditions of zakat recipients, especially the poor and

needy who are still living in poverty even after they have received zakat every month or potential

zakat recipients could not get any zakat assistance because of bureaucracy or geographical

problems. This is supported by many mass media reports of existing poverty in the society. In

fact, many people are hoping that zakat should be able to eradicate poverty, or at least to reduce

the number of poor households in the Muslim community. TABLE 1 shows the percentage of

poor and hardcore poor households in Malaysia which accounted 5.7 per cent and 1.2 per cent

respectively in 2004. The states of Sabah, Terengganu, Kelantan and Sarawak are among the

states contributing a large number of percentage of households categorized as poor and hardcore

poor. These indications show there are still many poor people in Malaysia. Thus the

government must act quickly to settle and resolve this issue.

From the perspective of economy, income is an important indicator to determine whether

someone is poor or not. Therefore there are many policies and strategies planned and

implemented by the government to eradicate poverty and it was a main variable in many studies.

The key concept which has been discussed widely is the concept of poverty line income (PLI) in

Malaysia, whether at the state level including in Peninsular Malaysia or Malaysia as a whole.

TABLE 1 shows the poverty line of the poor and needy in Malaysia in 2004 based on the Ninth

Malaysia Plan Report, 2006-2010. Actually the poverty line of the hardcore poor in Malaysia

was RM415 compared to the income poverty line at RM691. Hence, the government's target of


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eradicating poverty is to ensure the level of poor household income should exceed the targeted

income poverty line. However, if poverty eradication strategy is used solely on the income

poverty line measure, this study thinks it is somehow too difficult to achieve the target. This is

because the numbers of poor household keep increasing from year to year due to many external

factors including the impact of economic downturn and the high cost of living. Therefore, this

study proposes an alternative economic measure to be targeted based on the concept of relative

poverty rather than concentrate on absolute poverty. It involves the aspects of quality of life

which could become an alternative measure of government performance to eradicate poverty. In

fact, there are also some studies that had measured poverty alleviation achievement based on the

concept of maqasid sharia. Therefore, the government should give more focus on a number of

economic and non economic objectives, in line with the requirements of sharia. This shows that

the use of the philosophy of Islam is a more important indicator than the economic philosophy.

This measurement is clearly an alternative strategy to measure the changing socio-economic

aspects of the individual and not solely focused on the economic aspects.

According to Greene, and Yoon (2004), many economists have actually started to review the two

basic aspects namely the economic dimension of human religion and happiness and the

relationship between religion and happiness (Ellison, 1991; Iannaccone, 1998, Argyle 1999, Frey

& Stutzer, 2002). This means that human happiness can also become an important output

measure of achievement in the distribution of zakat by zakat institutions. Interestingly, the

religious aspect has received recognition in studies by non-Muslim economists especially in

Christianity. Many studies have indicated that religiosity has many advantages including

reducing human neglect and criminal activities (Freeman, 1986, and Hull, 2000), and in fact

according to Greene and Yoon (2004), historically Adam Smith had also considered the

religiosity aspects as the initiator of good life as it has a positive impact on individual‘s

psychology and happiness.

The question is whether the strategy of increasing the religiosity of the poor and needy zakat

recipients by zakat institutions could possibly solve their poverty problems. This study raises

this issue considering that the impact of zakat distribution should be viewed as a long term

target. In addition, the first strategy to be setup by zakat institutions must be started from the

attitude of the zakat recipients. The attitude of the zakat recipients should be initially changed to

ensure that every strategy or policy, whether to raise the levels of income or quality of life, could

be achieved. Moreover, it is believed that the foundation of an individual‘s attitude change is his

level of religiosity. There are assumptions that the poor are not only poor in terms of income but

are also poor in their mind and religion. Do these poor people have low levels of religiosity,

faith to Allah s.w.t or morals? If the zakat institutions provide religious education to the poor

and needy would this help them overcome the problems of poverty? This study will examine

this issue of religiosity of zakat recipients as well as their quality of life as the basic factors of

policy achievement, including the policy to eradicate poverty through localization of zakat

management (as suggested by Muhammad Syukri, 2006) and it should be given serious

consideration by policy makers, especially the zakat institution.


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LITERARTURE REVIEW

The Concept of Localization

The word localization is used interchangeably with the word decentralization (Shah and

Thompson, 2004; p.2). The issues of fiscal federalism and decentralization that had earlier

received little thought by political scientists and economists have became the theme of

international professional attention by the 1990‘s and have continued to draw the attention of

specialists and policy makers ever since. There is a worldwide trend towards increasing the

transfer of power, resources and responsibilities to the sub national levels of government and

decentralization can emerge in the form of devolution of major functional responsibilities, major

increases in fiscal transfers to sub national governments and in the form of more administrative

autonomy to sub central or no central levels relative to the central control. It can also appear as a

shift from appointed to elected sub national governments thereby assigning these levels the

political functions of governance such as representation (Sharma 2005). The word

decentralization and localization can be used interchangeably because localization means

decentralization of decision making to the local level and can be pursued through political,

administrative and fiscal decentralization (Shah and Thompson, 2004). Rondinelli and Cheema

(1983; p. 14) have stated that decentralization via localization means overcoming the severe

limitations of centrally controlled national planning by delegating greater authority for

development planning and management to officials who are working in the field and closer to the

problems. It also allows officials to disaggregate and modify development plans and programs to

the needs of heterogeneous regions and groups. Decentralization in fact alters the structure of

governance by shifting the structure of local accountability from central to local constituents. As

mentioned by Schneider (2003), decentralization involved changing the geographical boundaries

of political contestation by altering the relative power of different actors and by changing the

location of government interaction with society. From another point of view, decentralization is

defined as the devolution by central (i.e. national) government of specific functions, with all of

the administrative, political and economic attributes that these entail, to democratic local (or

municipal) governments which are independent of the centre within a legally delimited

geographic and functional domain (Faguet, 2003; p. 3).

Localization has many advantages. Firstly, it fosters trusted officers ( or in the case of this study

trusted amils). Braun and Grote (2002) argued that localization encourages such positive

incentive by increasing the democratic accountability of the state. The basic intuition here is that

government is more accountable when it is closer to the people and the people have their voices

heard (Shah and Thompson, 2004; and Sharma, 2009). Local government officials are in a better

position to judge what citizens want if they represent small constituencies. Likewise, citizens can

better oversee the behavior of public officials when they live in the same region than when the

officials operate from a distant national capital. The officer elected could take full responsibility


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in their duty and task as well as increase the responsiveness to local needs (Oates, 1972; Khaf,

1995a; and Faguet, 2004). Trusted officer will lead improvement in transparency and

accountability as mentioned by many studies (Tugrul and Shah, 2002; Crook and Manor, 2000

and Park and Wang, 2010). They also may have predominant responsibility of designing and

implementing antipoverty policies due to their information and transaction cost advantages.

(Rao, 2002).

Secondly, village involvement could happen when the local institution plays its role (Francis and

James, 2003; Alatas et.al, 2003; Park and Wang, 2010). For instance Alatas et al (2003) in their

study in Indonesia collects data on a sample of household that participate in social activities. In

their study, four distinct types of social activities have been classified: socialibility, networks,

social organizations and village government organizations. Respondents were asked questions

about their village government. The result revealed that positive voice and participation

happened in reporting the village involvement. The engagement of village government

organizations is generally negative, while the net effect of membership in social organization is

more often with the good governance outcomes. The important implication from this study is

that existing social organizations such as the mosque could have a potentially important role to

play in enhancing the performance of institutions. Local participation in implementing any

programs planned by local government could also improve accountability to local citizens itself

on the one hand and to higher level governments on the other (Rao, 2002). Localization could

create efficient distribution. The argument is that allocative efficiency could be achieved by

devoting resource and power to local government (Faguet, 2000; Hankla, 2008; and Asfar, 2010)

and cost efficient (Rao, 2002; Balaguer-Coll, et al, 2010). Indeed, many studies agreed that

decentralization to local governance might reduce inequalities or disparities and separatism

between regions and localities (Crook and Manor, 2000 and Hankla, 2008).

Thirdly, local governance could provide quality governance when it efficiently and reliably

provides citizens with the public goods and services that they desire. This implies that, in the

context of this study, the amil or zakat officer could recognize the local needs especially required

by the poor and the needy to improve their life. Many scholars such as Tiebout (1956) and Oates

(1972) who used the local government models assumed that central governments were unable to

target different bundles of public goods to different regions (Treisman 2007). Moreover, it is

important that local governments have the incentive to provide public over particularistic goods

in the first place (Breton, 2002) and it must be adherence to local priorities (Sharma, 2005). They

would have a superior sensitivity to local needs (Faguet, 2004; p.887) because they do seem to

have access to source of information that enables them to improve the targeting of social

assistance to the poor (Alderman, 2002; p.399). This happens because local authorities appear to

have right to use to information that is not easily captured in household surveys and to use this

information to allocate program benefits among the households under their jurisdiction.

(Alderman, 2002; p.399). Tiebout (1956) has argued that local government can improve the

efficiency of public goods provision by making it less uniform. In addition, the experienced

officer in charge of districts made up of local entities could place officials in the branch in an

anomalous position. Oates (1972) added that finally, the region could achieve the optimum level


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of decentralization which all the goods and services provided are particularly based on the

preferences of the particular society.

Localization of Zakat Management

Could the concept of localization be implemented in zakat management in Malaysia? Khaf

(1995b) revealed that the model of local committees was implemented in Pakistan where more

than 250,000 persons were involved in the process (Khaf, 1995a; p. 226). The model which

exerts an effective role of zakat collection and distribution has several significant impacts.

Firstly, awareness of the importance and religious rules of zakat can be spread quickly at the

local level. Secondly, this model could solve the problem in zakat distribution to recipients

because local committees could find out the conditions of deserving recipients and could

disburse zakat to eligible recipients in accordance to clear instructions. This model could also

alleviate the effect of begging as mentioned by Muhammad Syukri (2006). Khaf (1995a)

believed that the existing zakat distribution system failed to effectively reduce the procedure of

zakat application because the applicants have to fill in many forms that in some aspects may

degrade the personal dignity of the poor. Local committees, on the other hand, could identify or

notice families who do not ask for zakat or do not show signs of need in spite of their poverty.

Localization of zakat distribution could improve the life of the poor and the needy because the

amil knows what this group should deserve from the zakat payment. Khaf (1995a) also added

that localization could spur local economic activities according to the preferences in particular

villages. In addition, according to Muhammad Syukri (2006), the current zakat distribution

system could not alleviate poverty among the poor and needy as well as lighten their burden in

life. The amount of zakat given by the zakat institution is relatively small. Actually the zakat

institution should not limit the amount given to the poor and the needy. Instead the amount given

out should be enough to meet the needs of the recipients and that they are satisfied after

receiving the zakat. This situation has been practiced during the time of Umar Al-Khattab, for

instance, who directed his amil to deliver the zakat. Umar was once asked what to do with the

zakat collected from Bedouin Arabs and he answered, ―by Allah, I shall render sadaqa to them

until each of them becomes the owner of a hundred camels, male and female‖ (Qardawi, 1999; p.

512).

This concept is also supported by Ajeel (1995) in his study on Kuwait through the Kuwait Zakat

House (KZH). In Kuwait public zakat committees have been formed to tackle the needs of the

poor through the role of the mosque as the socio-cultural and religious institution (Ajeel, 1995; p.

260). The first zakat committee was formed as a voluntary body in 1973 at the Othman Mosque

which served about 7.5 per cent of the total population of Kuwait. These committees have grown

and reached 25 units by 1995 and were distributed throughout Kuwait owing to good public

response to such committee and also its great success in making people aware of the duty of

zakat (Ajeel, 1995; p. 260). Khaf (1999) believes that this chronicle supports the concept of

localization or localities that have been implemented successfully by the Islamic state especially


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in its early period. Government revenue was spent and distributed in an efficient system of zakat

and taxation. Although at that time, the Islamic state is small, but it was possible for zakat not

only to be distributed efficiently but also quickly and rapidly. The state government has the right

to take charge of zakat collection and distribution once the government decrees that payment of

zakat must be made to the Baitulmal. Indeed the majority of fuqaha‘ emphasized that

individuals must pay their zakat through the government. The main reason behind that argument

is supported by many other scholars who agreed that the Baitulmal could disburse zakat to its

proper recipients as mentioned in the Quran.

The most interesting point here is the concept of ‗localization‘ that was applied in the Prophets‘

state government as mentioned previously. Government revenue was distributed efficiently in

the form of zakat and other taxes. Although it was a small government in the various states,

zakat was distributed immediately after collection. Khaf (1999) also stated it was reported at the

time of the Prophet (pbuh) that many workers often said that they used to come back from their

zakat missions empty handed because they had distributed the zakat on the spot. He added that

this scenario may indicate that there were sizeable needs for such distribution and little was

usually left as spare revenues in the public treasury or precautionary reserves for future expenses.

To sum, the localization of zakat has been implemented successfully and zakat was distributed

efficiently during the Prophet‘s life.

The question is could the role of the mosque and the concept of localization be combined to

improve the management system of zakat in Malaysia? The effectiveness of zakat collection and

distribution mainly depends on the good governance of the zakat institution and this study

believes good governance could happen if the role of the mosque and the zakat institution

complement each other. What is most interesting is the suggestion made by Muhammad Syukri

(2006) that urged the zakat institution in Malaysia to practice the concept of localization. His

argument is based on several issues. First, the statistics of zakat distribution in Malaysia show

management deficiency where most of the zakat fund was not fully distributed to the zakat

recipients. Only around 70 to 75 per cent of zakat fund was distributed in Malaysia from 2001

until 2007 and almost 25 to 30 per cent was left idle (Muhammad Syukri 2006; and Hairunnizam

et.al 2010). This situation reflects the problem of emerging connection gap between the zakat

institution and zakat recipients.

The zakat institutions were blamed because they were unable to recognize the deserving zakat

recipients. Another detected problem was the rise of the zakat recipient application forms being

sold illegally by certain irresponsible individuals to the prospective zakat recipients. A

bureaucracy problem was also detected in the zakat application procedure and finally was the

geographical problem where potential zakat recipients could not be reached and identified by the

amil because their homes were scattered in the village, district or state (Muhammad Syukri,

2006; p. 214-219; and Abdul Ghafar and Nur Azura, 2006; p. 97). Muhammad Syukri (2006)

also added that zakat localization would allow local trusted amil to foster close relationship with

the zakat payers and the zakat recipients in the same place or village. Therefore, the process of

zakat distribution could be done without any or unwanted delay in time (Nik Mustapha, 1991;

Khaf, 1995a and Mujaini, 2005) as practiced during the Prophet‘s life. In addition, if the amil

discovers that in his region all the zakat recipients have received the zakat proceed and there is


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surplus zakat fund in the Baitulmal, the zakat surplus could be transferred to another region

facing deficit in zakat distribution. The general principal that should be followed is that zakat

must be distributed in the area where it is collected and the poor and the needy in that area have

priority over all others since zakat is collected from their neighbors, kins and friends. However,

scholars agreed that all excess zakat funds may be passed to neighboring areas or to the central

government (Qardawi, 1999; p. 513-517). If the excess zakat could be distributed to other

regions, it may reduce inequalities between regions or states. Finally through decentralization the

amount of zakat distributed to each recipient would match the price of goods and services

demanded by zakat recipient according to particular areas especially those who live in the inland

and rural areas (Abdul Ghafar and Nur Azura, 2006; p.97).

Some studies were conducted to discover the public perception towards the concept of zakat

localization. For example two studies by Radiah et.al (2010b and 2010c) found that both the amil

and zakat recipients agreed on the proposed concept of localization of zakat distribution.

Interestingly, the study found a significantly difference in the level of agreement between both

groups where the amil shows a higher level of agreement to implement this concept in order to

improve the image of the zakat institution. However the role of the mosque as an institution to

implement this concept was not discussed explicitly even though most of the amils are

committee members of mosques and collect the zakat at the mosque in their locality. Thus, this

issue becomes the main motivation for this study to recognize the role of the mosque managing

the zakat.

Muhammad Aziz (1993) found that historically, zakat in Malaysia prior to the colonial period

generally was collected and distributed at village level. He also argued that decentralization of

zakat administration is not only consistent with the requirement of syariah but under the present

political arrangements in Malaysia, it is a feasible alternative that will protect the interests of the

poor and the needy and other rightful beneficiaries of zakat (Abdul Aziz, 1993; p. 179). Other

studies also suggested that zakat centers should be established in villages, town and cities within

Muslim provinces and the mosque can be considered as a natural landmark to take this

responsibility (Zayas, 2003 and Khaf, 1995a). On the othe hand, Abdul Wahab (1995) urged that

such form of zakat payments arose from the high esteem that peasants held for their religious

teachers and this tradition still continues in some states today. This shows that the zakat payers

are confident of the religious teachers who they believe could disburse the zakat fair and just. In

other Muslim countries like Pakistan and Kuwait, committee-based models exist where religious

leaders or the committee members are in the best position to reach the poor members of the

community (Khaf, 1995a; and Ajeel 1995). Furthermore, the positive side of localization is that

the members of the community could have a voice and will participate and actively involved in

the village activities (Alatas et al, 2003).

The concept of Quality of life and Religiosity

Many researches were concerned with zakat collection specifically on how zakat collection could

be improved and how to distribute zakat effectively (Mohd Ali et. al, 2003; Abdul Monir, 1994;

Mohd Parid, 2001). However, there are many studies looking at the effectiveness of zakat

distribution to the zakat recipients especially the poor and needy. For instance, according to


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Mohd Parid (2001), there are various methods of zakat distribution from Islamic perspective. He

said the zakat distribution is called successful if it is sufficient and provides the basic comfort of

lives to the zakat recipients. According to him an optimum level of distribution should guarantee

a certain quality of life that is sustainable for zakat recipients. It also indicates that the zakat

recipients should achieve a certain quality standard of living at least to obtain an adequate level

of essential goods. In Malaysia, the quality of life of individuals can be viewed in many aspects,

including personal development, healthy living, accessibility and freedom to acquire knowledge

and to enjoy living standards that exceed the basic and the psychological needs of individuals to

achieve a level of social welfare in line with the objective of the country (Economic Planning

Unit, 2002).

This definition was in line with that of Burnel and Galster (1992) who saw the quality of life as

the welfare of a person to undergo a process of life which includes the aspects of nutrition,

education, health, housing, aesthetics, and so forth. If these aspects are met, then the quality of

life of the people has improved. Nevertheless existing studies only focus on the life quality of

the whole community regardless of the life quality of the minority groups and or the poor group.

Therefore, a study is needed to analyze the quality of life of the poor to make sure they are not

marginalized from the mainstream. There is a study by Zainal Abidin (2003) that discussed on

the calculation of the had kifayah as proposed by the Federal Territory Islamic Religious

Department (JAWI). The study also showed that there were six major aspects of quality of life,

namely protection, food, clothing, medicine, education and transportation. There are several

other studies that focused on the quality of life of a specific group such as the squatters in Kuala

Lumpur and the participants of the Amanah Ikhtiar Malaysia micro financing project (Wan

Zulaini, 1997; Rosmalini, 1998). Those studies focused on the causes and effect of government

intervention to curb the phenomenon of poverty. For instance, the study by Rosmalini (1998)

found that the poor participants in the Amanah Ikhtiar Malaysia (AIM) micro financing project

successfully improved their living standards, but the socio-economic indicators were not

discussed in detail.. This study differs from previous studies because the focus group is the poor

and needy who have received zakat assistance from zakat institutions. This study is also

important to examine whether their quality of their lives have increased or not, especially to

explore the important socio-economic indicators such as education, health, water and electricity

and so on, which are considered as the prerequisite and catalyst for community development,

particularly at the state level (Md Zhahir, 1996).

Thus a new dimension that has not got the full attention of zakat institutions is the effectiveness

of zakat distribution and it impact on the quality of life of the poor and needy. This is because the

concept of multidimensional nature of poverty is very subjective and it involves the feelings of

the poor due to the nature of abundance (Cheong Kee Cheok & Federich , 1977). Although in

terms of income, this group is still categorized as poor, but they may not feel poor at the existing

quality of life. Or their income may have passed the poverty line, but they may feel poor

because they feel that their quality of life is low. Thus the quality of life aspect for zakat

recipient should be given serious consideration by zakat institutions because in Islam zakat is an

important tool in balancing the socio-economic development of the Muslims.


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The question arises whether only zakat assistance could improve the standard of living of zakat

recipients in terms of economics or quality of life. A study by Hairunnizam et. al (2004) has

found that zakat assistance has given a significant but a very small impact on the quality of life

of the zakat recipients; especially in the aspect of education and social participation. To

conclude, it clearly shows that zakat assistance in the form of money alone will not give a big

impact on the lives of the poor and needy zakat recipients. In fact, the study suggests that zakat

assistance provided by zakat institutions should also include the provision of daily necessities

such as rice, flour, sugar and so forth. The study clearly showed that other factors need to be

addressed by zakat institutions such as increasing the recipients‘‘ level of education and also to

encourage them to be involved in social activities. Therefore, this study believes that these

aspects should be considered in the analysis. The concept of education should not only include

formal education but also religious education.

There are also several studies, for instance by Ellison et.al (1989) and Ellison (1991) that

examined the relationship between religious commitment and life satisfaction of individuals.

Ellison (1991) for example studied the behavior of a small group of individuals in the United

States (U.S.) who were directly involved in religious organizations, their frequency of attendance

at places of worship (church), the level of religious belief and so forth. The study found that

involvement in religious organizations and high level of religiosity will increase the level of

respondents‘ satisfaction on their quality of life. To be sure the study examined the aspects of

spirituality and its relationship with the life satisfaction of individuals, especially in the

psychological aspects of the individual. The study also concluded that an important aspect of

religiosity involved the number of participation in any religious activities that will have a

positive impact on individual life satisfaction. Another question that arises, is that whether

religiosity has a direct or continuous effect to the quality of life? Ellison et al (1989) have made

a clear statement that religiosity naturally involves the individual participation in community and

social activities especially in religious activities. Thus, the participation in social activities

mainly will improve relationships among the society; give a positive impact on mental health

which finally will improve the individual life satisfaction.

On the other hand, the study by Schieman et al (2003) is slightly different from that of Ellison et

al (1989) where his study has emphasized on the skills and knowledge (Mastery). He argued that

religiosity in individuals could provide them the skills to control their lives and achieve their

hopes and dreams without blaming their fate alone. These skills are believed can be fostered

through the impact of religiosity. In fact, many psychologists agreed that individual skills are

practiced due to religious values that will not grind down their real life but rather can control the

difficulty of life and finally improve their life satisfaction. Some studies also agreed on the

importance of religiosity and its impact on individual mental health that will ultimately improve

the life satisfaction of individuals. .

Trust in Institution, the effects of zakat & Attitude

Any perception towards an institution is begins with the perception of trust on the institution

(Vigoda and Yuval, 2003; Vigoda, 2006; and Mikami and Inoguchi, 2008). Institution in this

case is merely a public institution that is part of a community which concerns itself with the


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achievement of public objectives and the implementation of public policy (McGregor, 1982; p.

304). Vigoda-Gadot (2006) argued that the first variable to be tested in this context is trust in the

governance of any institution. The relationship is based on studies that have demonstrated a

positive relationship between trust and the public‘s satisfaction with the services they receive

from the government (Van de Walle and Bouckaert 2003; Vigoda and Yuval 2003; Welch 2005).

For instance, Vigoda and Yuval (2003) have confirmed the relationship where performance leads

to trust rather than trust leading to higher evaluations of performance. Restoring trust in the

government cannot just be based on a managerial action-plan but requires social engineering as

well. How could the government change these perceptions and evaluation criteria in a way that is

acceptable in a democratic society (Walle and Bouckaert, 2003)?

Trust in an institution could affect the perception towards that institution (Mikami and Inoguchi,

2008). These two variables could be considered as input factors in the system. After a certain

process is carried out, as in our study, zakat distribution, the outcome or the effect from zakat

distribution should be felt by the zakat recipients. The effects of zakat as discussed before are to

eradicate poverty, improve economic growth and also the quality of life (Mannan; 2003, Wess;

2002 and Hairunnizam et. al, 2004; Hassan & Khan 2007). For instance some studies agreed that

the process of decentralization could alleviate poverty (Daze, 1990; Rao, 2002; Booth, 2003; and

Asfar 2010). The effects of zakat management would give a significant impact to zakat

recipients. Hence the effectiveness of distribution of zakat is measured by its ability to eradicate

poverty, improve economic growth and quality of life. (Mannan, 2003; Wess, 2002;

Hairunnizam et. al, 2004; Hassan & Khan, 2007). Quality of life in this study was chosen

because it represents the output quality of life that involves people directly.

The attitude of the recipients in this study refers to their attitude to change their status from being

a zakat recipient to a zakat payer. It is an early attempt to deflect public‘s view in labeling this

group as "poor-minded" who does not want change. Syed Husin (1978) defended that the poor

Malays were not poor-minded if the government gave them land as an input to develop their

economy. This means that the poor are not really poor-minded, but they have no economic

resources to develop their lives that lead them to be trapped in poverty indefinitely.

METHODOLOGY

Research Model and Measurement Design

This study tries to empirically test whether significant relationships exist between religiosity,

trust in Islamic institution, attitude, quality of life and the proposed localization of zakat

distribution based on the perceptions of the zakat recipients (the poor and needy). These

relationships will be analyzed using structural equation modeling (SEM) following Bryne (2001)

based on the framework of Vigoda and Yuval (2003) and Mikami and Inoguchi (2008).

Basically, SEM is a statistical model that seeks to explain the relationships among variables,

expressed in a series or equations (similar to series of multiple regression equations). These

equations depict all the relationships among unobservable or latent variables (Hair et. al, 2006;

p.711). It is noteworthy that these structural equations can be modeled pictorially to enable a


12

clearer conceptualization of the theory under study. For this study the structural equation model

is shown in Figure 1.

The model consists of one observed variable that is religiosity and four latent variables namely

(1) proposed localization of zakat distribution (2) attitude (3) quality of life and (4) trust in the

Islamic institution. Latent variables in SEM refer to variables that are not measured directly.

Instead each latent variable is the constructs of indicator (observed) variables associated with it.

Most of the indicator variables are responses to 5 Likert scaled items listed in the survey

questionnaire. As shown in Figure 1 the proposed localization of zakat distribution is determined

by 3 indicator variables namely (1) close relationship and transparency between the amil and

zakat recipients; (2) efficient and easy identification of zakat recipients by the amil and (3) trust

in the zakat system and institution. (Refer to TABLE 2). The mean value of each variable is used

in this study (CFA second stage approach) following the study done by Radiah et.al.(2010).

In addition, trust in institution is determined by 2 indicator variables namely (1) trust to the

Malaysian Islamic Development Dept. (JAKIM) and (2) trust to the state baitulmal. (See TABLE 3). On

the other hand, quality of life is determined by several quality of life indicators that follow

accordingly to the Quality of Life Report (2002) namely the quality of food and clothing,

transportation and communications, health and medical care, child education, housing and shelter

and finally social participation. These indicators are measured by three Likert scale that measure

the degree of satisfaction of the zakat recipients ranging from ―not satisfied‖, to ―very satisfied‖.

The quality of life of respondents was measured by calculating the mean average of the scale for

each item of quality. Finally, 2 indicator variables determine the attitude of zakat recipients based

on two Likert scale items specifically (1) whether they would like to change their life to become

zakat payers and (2) whether they would like to apply for zakat capital in order to become an

entrepreneur as recommended by majority of state zakat institutions,

Mean while, the measurement of income in this study is the monthly income of the respondents.

It can be divided into several categories of income. The average income poverty line (PLI) is

RM415 for the category of hardcore poor, while the income of RM416 to RM691 is for the

category of poor and income more than RM692 and above is considered above the average

poverty line in Malaysia. (See TABLE 1). On the other hand, the measurement of the level of

education is based on three categories, uneducated, primary-school educated and finally

secondary-school educated. However this study found that the majority of respondents are

primary-school educated.

Finally the religious Index (RI) is an interesting variable to be discussed. There are many studies

that attempted to estimate the level of religiosity and faith of an individual, but the debate is still

open to make which estimate is acceptable. In reality, religiosity involves a personal matter

between the individual and God and no one can measure this accurately. However, this variable

probably could be estimated based on individual action within the law of shariah. This means

that if an individual who obeys Allah's command consistently and expects His good pleasure,

then the individual is considered to have a better level of religiosity than those who are not

obedient to the order of Allah (Siti Adilah, 1999; and Naziruddin and Shabri, 2003, p. 40).


13

Thus, in measuring the level of religiosity, this study will adapt the study done by Naziruddin

and Shabri (2003) as it has a comprehensive measure of religiosity compared to other studies that

only measure the individual‘s faith alone (for example, a study by Mohd Ali et al, 2004). The

study by Naziruddin and M. Shabri (2003) has analyzed religiosity factors comprehensively and

they have divided religiosity into three main components, namely compulsory (fard), illegal

(haram) and Sunnah (mandub) components . Each component has its own weightage and the

difference is that the compulsory component must have a higher weightage than the illegal and

Sunnah components. (See Naziruddin and M. Shabri, 2003; p.41)

Measurement of the compulsory components (KW) can be divided into two parts, the pillars of

Islam and Iman (PISIM). A total of six questions have been asked to represent these components

and the weightage is equal to 100. The illegal component (KH), comprises 5 questions (FASAD)

and the weightage is 55 and finally the component of Sunnah (KS) is the item that shows actions

that are not placed under PISIM and FASAD, but it could increase the level of religiosity, to be

rewarded by Allah to those who do it (SPIRIT), and vice versa. Thus, the weightage value of KS

is equal to 2 (Naziruddin and M. Shabri, 2003; p.41). All components are measured as follows:

1. Compulsory component (KW), it is measured as follows; 6

KWi = 100 Σ PISIM ij (1) j = 1

Where:

KW = component must act.

PISIM = Islam and Iman

i = respondent.

j = number of questions involved.

2. While the components of illegal acts (KH), is measured as follows; 11

KHi = 55 Σ FASAD ik (2) k = 7 Where:

KH = components of illegal acts.

FASAD = item of the illegal act

i = respondent.

k = number of questions involved.

3. Components of the sunnah (KS), it is measured as follows; 18

KSi = 2 Σ SPIRIT il (3) l = 12

Where:

KS = components of illegal acts.


14

SPIRIT = the act of Sunnah item

i = respondent.

l = number of questions involved.

Finally, the religious index (RI) to be tested includes all the components as measured by the

following formula:

RI i = [(KW i + i + KS KH i / 2292] x 100 (4)

All notations used are similar to equation (1), (2) and (3). RI is actually measured from the

addition of KW, KH and KS by the number of questions where (1800 + 440 + 52 = 2292) divided

by the maximum value accessible to all respondents and multiplied by 100.

Notice in Figure 1 that the latent variables are labeled in the 4 big circles and their indicator

variables are designated in the rectangles. The three observed variables are designated also in

the rectangles namely religiosity (RI) , level of education (EDU) and level of income (Y) and

these variables do not have any indicators. The 18 smaller circles are the measurement errors in

the variables. The straight line pointing from a latent variable to the indicator variable shows the

causal effect of the latent variable on the indicator variable. The straight one headed arrows

between the latent variables indicate a hypothesized direct relationship between 2 latent

variables, while the straight 2 headed arrow between the latent variables indicates the covariance

(or lack thereof) between the latent variables. Firstly, the correlation and covariance of 2 latent

variables will be analyzed to see whether any significant relationship exists between both

variables. Then the effect of all variables to each other will be analyzed to determine which

variable strongly influenced the other based on the value coefficient and its significant level. The

analysis will be divided into two models namely religiosity as the independent variable

(exogenous) and religiosity as the dependent variable (endogenous).

Data Collection

Survey Instrument

Primary data is collected by the survey method using a structured questionnaire that consisted

two sections: demographic data of the respondents and observables variables including of the

five latent variables and observed variable listed in the form of statements. There are three types

of scales used in this questionnaire namely 5-point Likert scales ranging from (1) strongly

disagree to (5) strongly agree; 3-point Likert scales ranging from (1) disagree to (3) strongly

agree and finally 2-point Likert scales between the answer is (1) Yes or (2) No. All these scales

were used to measure the extent to which the respondents agree or disagree to each statement.

The mean response value of each observable variable is used in the study.

Sample A total of 687 poor and needy zakat recipients were sampled from the states of Selangor, Pulau

Pinang, Federal Territory of Kuala Lumpur, Melaka, Terengganu and Kedah (see TABLE 4).

The poor and needy recipients were selected because they represented the largest percentage

(almost 50 per cent) of zakat recipients (Hairunnizam et.al, 2010).


15

It should be mentioned that Selangor and Pulau Pinang are the states that have corporatized zakat

collection and distribution. Federal Territory of Kuala Lumpur and Melaka have corporatized

zakat collection but not zakat distribution and finally Terengganu and Kedah represent the states

that did not corporatize at all (See TABLE 5). The differences between zakat management

structures are expected to provide a balance and unique results of different and it will be

interesting to be analyzed.

Tool of Analysis Data analysis incorporates 2 statistical techniques namely exploratory factor analysis (EFA), and

confirmatory factor analysis (CFA) using structural equation modeling (SEM). EFA is utilized

at the beginning of the study to explore the number of indicator variables that can be extracted to

represent the latent variables. As proposed by Anderson & Gerbing (1988, p.412), analysis at this

stage is exclusively exploratory in nature because there is no prior specification of the number of

factors to be analyzed.

Having identified the number of indicator variables, the next step is to confirm the validity of the

variables in the study and to establish the causal relationships between the variables. This is

analyzed by CFA using structural equation modeling (SEM) as described earlier. SEM has its

advantages namely; estimation of multiple and interrelated dependent relationships, ability to

represent unobserved concepts in these relationships, correct measurement error in the estimation

process, and defining a model to explain the entire set of relationships.

To test the reliability and the validity of the variables in the model, CFA was conducted using

AMOS software package. The aim is to measure the goodness of fit of the structural equation

model (SEM). If the goodness of fit is adequate, this means the data fits the model sufficiently.

Hence the model argues for the plausibility of suggested relations among the variables and vice

versa. Since there is no single recommended measure of fit for the SEM a variety of measures

are proposed in the literature to assess the relative fit of the data to the model (Bollen 1999,

Browne & Cudeck 1993, Hu & Bentler 1999, Cronbach & Meehl 1955, Bonnett 2002, Hair et al

2006). They recommended the use of various goodness of fit indices such as the chi-square, Root

Mean Square Error of Estimation (RMSEA), Comparative Fit Index (CFI), Relative Fit Index

(RFI), Tucker Lewis Index (TLI) and Normed Fit Index (NFI). For each index (except for

RMSEA) a value close to 1 indicates a good fit. For RMSEA a value of about 0.08 or less would

indicate a reasonable error of approximation.

FINDINGS Based on TABLE 6, majority of zakat recipients (37.3 per cent) received monthly zakat less than

3 years, followed by 3 to 5 years (38.8 per cent) and only 7.9 per cent of respondents received

zakat more than 8 years. This finding also concludes that majority of respondents (76.1 per cent)

are receiving zakat in the last 5 years. In terms of amount of monthly zakat received, majority of

them (27.6 per cent), received between RM201 and RM300 while 19.9 per cent received

between RM100 and RM200 per month. Only 4.6 per cent of respondents received zakat more

than RM700 per month. The actual amount of zakat provided by the institution is dependent on

the number of persons per household or had kifayah. If many members of a household are not


16

working and there is a disabled person in the household, it is possible to receive a high amount of

zakat. Hence, the study showed that all respondents received various amounts of monthly zakat.

Based on TABLE 7, the quality of life of the poor is generally quite satisfactory. Based on the

responses given, only 61.2 per cent of the poor were satisfied while the rest of them were not

satisfied with the quality of their lives. Quality of life in transportation and communication;

health and medical care; and housing and shelter provide a low level of satisfaction relatively

compared to other indicators of quality of life. This clearly shows the poor still cannot fully

enjoy a satisfactory quality of life. This is due to several reasons such as medical costs keep

increasing every year and cost of housing is much expensive in major cities, especially in Penang

and Kuala Lumpur. Many of them live in flats, cheap or low cost houses and this situation will

create the possibility of discomfort to the quality of housing, especially for those who are living

in big cities compared to those living in villages. Furthermore, those who have big sized families

could contribute to the perception of dissatisfaction. On the other hand, the quality of life in

terms of food and clothing also showed a less favorable quality where only 75.3 per cent of the

respondents were satisfied. Both aspects of quality are important because they represent the

basic needs of human survival. . Interestingly only 83.4 per cent of the respondents were satisfied

with the quality in terms of social participation indicating that generally they were not

marginalized from society. Perhaps they were even more active in community activities.

TABLE 8 shows the religiosity index (RI), which turns out to be the focus of discussion in this

study. It is an index, as measured by equations (1), (2), (3) and (4). According to Naziruddin

and Shabri (2003, p.47), the highest index that can be achieved is 100. Based on the results, the

majority of respondents (60.1 per cent) have achieved the overall value of RI between 91 and

100, while only 0.3 per cent of respondents achieved index below than 20. Almost 10.8 per cent

of respondents were in the RI of less than 50 per cent and the remaining respondents had more

than 50 per cent of RI. It showed that respondents generally had very good faith in their daily

life. Based on TABLE 9, the majority of the poor and needy had the desire to change and have a

positive attitude and not forever be a zakat recipient. This is shown by 84 per cent of respondents

would like to change their attitude. Only 16 per cent of respondents thought otherwise. This

group could be the aged and elderly respondents, widows, and those with health problems. For

those who want to change their life, the zakat institution in each state in Malaysia offers them

zakat capital as seed money to start a small scale business. The study found that 75.1 per cent of

respondent are interested in applying for zakat capital to enable them to become entrepreneurs as

compared to 24.9 per cent who were not interested.

TABLE 10 shows the majority of recipients have trust in the Islamic institutions in playing their

roles in developing Islam. However there are several respondents (not exceeding 1 per cent)

who did not believe in the Islamic institution. Despite the relatively small percentage, the

Islamic institutions still have to improve public confidence in implementing their roles to

develop Islam in Malaysia. TABLE 11 shows the level of agreement to the proposal of

localization by the zakat recipients. Localization of the zakat management was proposed by

Muhammad Shukri (2006) as an alternative solution to the problems of distribution of zakat. It

is expected that the localization process will easily facilitate zakat distribution to the zakat

recipients. Local amils at the district or village levels as well at particular localities could be


17

appointed on a regular basis and perform professional work to develop the personality of zakat

recipients with various kinds of programs especially in the aspect of religiosity (RI) and self-

motivation (entrepreneurship). Although this concept is new and still at the proposal stage, but

the study by Hairunnizam Wahid (2010b) found that the majority of zakat recipients including

amils do agree with the proposal where almost 80 per cent of respondents agreed with the

concept of zakat localization compared to 20 per cent who disagreed.

The subsequent analysis examines the relationship between each variable as mentioned before.

However initially, the covariance analysis should be done to ensure that all variables have

significant relationships among them. TABLE 12 shows the results where covariance does exist

between all the components and is significant at 1 per cent level except for quality of life (QOL)

and trust in institutions (INS) variables. Therefore, the path analysis between these two variables

should be dropped. Interestingly, the covariance between the religious variables (RI) and all

other variables are relatively very high. RI has a high covariance with LOC (2.13), INS (2.28),

QOL (1.06) and ATD (1.10). This model also meets the criteria of goodness of fit where χ2/df =

5.299, CFI = 0.933; RFI = 0.881, NFI = 0.919; TLI= 0.901 and RMSEA = 0.079. TABLE 13

shows the path analysis for each variable. Model 1 shows the influence of RI on LOC, INS,

QOL and ATD, while Model 2 shows the effect of LOC, INS, QOL and ATD to RI. Both

models have met the goodness of fit criteria in which, for model 1, χ2/df = 5.563, CFI = 0.926;

RFI = 0.875, NFI= 0.912; TLI= 0.895 and RMSEA = 0.082. On the other hand for Model 2,

χ2/df = 5.974, CFI = 0.919; RFI= 0.866, NFI= 0.905; TLI= 0.886 and RMSEA= 0.085. However

which of these 2 models shows a good model fit to be chosen for further analysis?

The justification for choice should be based on some important statistical criterions. Firstly, the

value of the standard error (SE), for model 1 is better than model 2 because in Model 2, there are

many variables that have high standard errors. According to Hair et.al (2006, p.238), smaller

standard error values indicate more legitimate and better estimation. Secondly, based on the

descriptive measures of the overall model, the ratio χ2/df should be as small as possible

(Schermelleh-Engel et. al, 2003; p.33). However due to the sensitivity of the χ2 statistic to the

sample size, alternative goodness-of fit measures has to be identified, for instance Root Mean

Square Error of Approximation (RMSEA) as suggested by Schermelleh-Engel et. al. (2003;

p.36). RMSEA is a measure of approximate fit in the population and is therefore concerned with

the discrepancy due to approximation. Thirdly, it is good to look into the descriptive measure

based on model comparisons using some comparison indices such as NFI, CFI, TLI and RFI.

Finally, this study will compare the model using descriptive measures of model parsimony.

Parsimony is considered to be important in assessing the model fit and serves as a criterion for

choosing between alternative models (Hu & Bentler, 1995; Mulaik, et.al, 1989; and Schermelleh-

Engel et. al, 2003; p.43). Several fit indices such as Parsimony Normed Fit Index (PNFI), the

Akaike Information Criteria (AIC) and the Expected Cross-Validation Index (ECVI) can be used

to decide the best model. Therefore, based on all criterions as discussed earlier, this study

believes that it is wise to choose Model 1 based on all criterions. Model 1 indicates the religiosity

variables (RI) as an exogenous (independent) variable; on the other hand the other variables such

as QOL, ATD, LOC and INS are recognized as endogenous variables.


18

TABLE 13 shows the variable RI is correlated positively significantly with LOC, QOL, INS

and ATD. The interpretation of the coefficient is as follows: the coefficient value between the RI

and LOC is 0.005 which means with a unit increase in RI; LOC will increase by 0.005 units and

it is significant at the 1 per cent level. On the other hand, the coefficient value between RI and

QOL is 0.003, hence a unit increase in RI would lead to improved QOL by 0.002 units

(significant at 5% level), Also a unit increase in RI would lead to an increase of 0.007 units of

INS (significant at 1% level) and will eventually cause ATD to be increased by 0.002 units

(significant at 1% level). This finding clearly shows that RI has relatively strong effects on INS

and LOC compared to other variables. Model 1 also shows that QOL is strongly influenced by

the LOC coefficient of 0.474 as compared to other variables. On the other hand, QOL is

significantly dependent on the level of education (coefficient = 0.083; significant at 1% level)

and income (coefficient = 0.116; significant at 1% level). The variable of attitude (ATD) is

significantly influenced by the variable quality of life (QOL) in which a unit increases in QOL

will lead to an increase of 0.263 units in ATD and is significant at the 1 per cent level.

Therefore, if the zakat institution wants to improve the ATD variable, that variable needs to be

improved by QOL. However QOL could be enhanced if the respondents‘ educational

background, income and RI increased and also through the proposed zakat localization which

LOC is expected to improve QOL through the role of the zakat institutions. This study can be

summarized as follows: LOC QOL ATD. Increased in ATD also eventually expected to

increase the level of income as an entrepreneur (as planned by zakat institutions), or alternatively

with the attitude change the zakat recipients could find other jobs in the government or private

sectors and eventually become the payers of zakat or at least have improved their life.

RECOMMENDATIONS AND POLICY IMPLICATIONS

This study found that religiosity is considerably high among the poor and needy group. They not

only have a high level of religiosity to perform the obligatory ibadah and to leave the forbidden

activities; they also have a strong commitment to implement the Sunnah activities such as

reading the Quran, joining congregational prayers (jamaah) in the mosques, fasting and so on.

This indicates the zakat institution could increase the religiosity level of zakat recipients

successfully or at least maintain their existing religiosity values. It can be done through religious

talks held at the mosque purposely and exclusively for them.

The overall level quality of life for the poor and needy is still considered low. However, the

overall quality of life is much better than the previous study by Hairunnizam et.al (2004) which

found that poor zakat recipients generally were not satisfied with the quality of their lives.

Overall the quality of life would be affected by localization of zakat distribution and religiosity

values because these two variables significantly affect the quality of life of the zakat recipients.

Religiosity values could be increased with informal learning such as the talk on religion at the

mosque, through the radio and television and so forth. In fact, what is important is to understand

that religious values should also be passed down to the younger generation who will be the future

successors of the families of the present zakat recipients. They should eventually come out of

poverty not only in the aspect of economy but also in the level of religiosity.


19

Religiosity affects significantly on all variables in this study. It shows the value of religiosity is

very important not only in the lives of the zakat recipients but also as a foundation which heads

the way of life. High level of religiosity values will also change the attitude of zakat recipients

positively. This is an important and integral part of positive change in the attitude of zakat

recipients in improving their economic status. This study has also proven that the value of

religiosity has a significant effect on the quality of life. This study is able to make an

improvement to the study by Hairunnizam et.al (2010b) who failed to prove the significant

impact of religiosity values toward the quality of life. The increase in religiosity values is

actually likely to affect the attitudes of zakat recipients who want to change their status from

zakat recipient to become zakat payers in the long term. Once a zakat recipient has a positive

personality, it will likely to increase his income level and ultimately improve his quality of life.

Zakat institutions should play their roles not only to distribute the zakat wisely, but also to plan

religious programs generally and specifically to the poor and needy, to plan motivational and

entrepreneurship courses to at least change their attitudes to became more positive.

Changes in attitudes, particularly amongst the zakat recipients may be implemented through

active involvement of amils at the mukim or village or community levels as suggested in this

study. This study has found that the proposed localization of zakat distribution would

significantly affect the quality of life and attitudes of zakat recipients. Amils at the local level

could serve not only collecting zakat and to identify potential zakat recipients in the particular

villages respectively, but more importantly to approach the zakat recipients through organized

programs now in the specific district or village. This is not only to ensure that zakat recipients

can be monitored more closely in zakat matters, but more importantly in the social aspect which

is the basic philosophy of zakat itself. Religiosity values is related to educational background,

culture, However, zakat recipients‘ backgrounds may vary between regions, villages or states

and thist require the experienced amil at the local level to handle and resolve such issues. This

will improve the quality of zakat distribution not only in distributing the zakat fund but also in

providing religious programs for the zakat recipients using the zakat funds collected. Through

such programs, zakat recipients are expected to increase their religiosity values or at least equal

to the religious level of the local community.

CONCLUSION

Religiosity is a major and current issue that must be addressed wisely by zakat institutions.

Another issue that could be highlighted in this study is the possible role of the mosque and its

effect on the level of religiosity amongst the zakat recipients. This is a major issue that must be

addressed wisely by the mosque particularly and zakat institutions generally. Despite numerous

views on the role of zakat to eradicate poverty, this is not the important objective in the

philosophy of zakat. The main philosophy of the zakat is actually cleansing the soul and wealth

not only of the zakat payers but also the zakat recipients, and this clearly shows that zakat is not

only confined to purely economic aspects. Purifying the soul through zakat shows the effect of

zakat is very important to the spiritual aspects related to religiosity values. The increase in

religiosity is important because it is fundamental to the purpose of human mankind by the

Creator. Success in educating people through the mosque, especially in the religiosity aspects to


20

the zakat recipients will not only increase their level of religious understanding, but will also

increase their awareness and change their attitudes towards having more positive attitude

gradually. This ultimately will increase the motivation of zakat recipients to strive to the end and

in the long run will lift them from poverty and improve their quality of life not only for them but

more importantly, their generations of children and descendants. It should be understood that

even though the success of zakat is targeted to eradicate poverty, if zakat does not change the

economic conditions of the poor and needy, it is still expected to improve their mental and

spiritual strengths. Actually this is the true spirit and philosophy of zakat management and

distribution.

PROPOSED FUTURE RESEARCH

This study suggests a study that would test the relationship between the level of religiosity,

localization of zakat distribution and the role of mosque as an Islamic institution. Could the

mosque play its role not only as a place to perform particular worship such as prayers but also

play its role in the economic aspect such as managing zakat or waqf etc. To implement the

localization of zakat management, amils must have their own offices and this study thinks that

the mosque could provide that facility at least as a branch office of the zakat institution.

Therefore, it is hypothesized that a significant relationship would exist among the variables

mentioned above.

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LIST OF TABLES:

TABLE 1: Poverty Line Income (PLI) Monthly average, poverty rates and Hardcore

Poverty, 2004

State Household

Size

Overall Poverty 2 Hardcore Poverty

2

PLI

(RM)

PLI Per

capita

(RM)

Rates of

Poverty 3

(%)

Food poverty

line

(RM)

PLI Per

capita

(RM)

Rates of

hardcore

poverty4 (%)

Johor 4.3 634 151 2.0 384 91 0.3

Kedah 4.6 654 143 7.0 402 88 1.3

Kelantan 5.2 675 130 10.6 438 84 1.3

Malacca 4.4 650 151 1.8 385 89 0.2

Negeri Sembilan 4.2 598 146 1.4 371 90 0.2

Pahang 4.2 609 147 4.0 392 94 1.0

Penang 4.1 615 152 0.3 373 91 neg. 5

Perak 4.1 589 144 4.9 371 90 1.1

Perlis 4.2 587 140 6.3 367 87 1.7

Selangor 4.6 726 159 1.0 420 92 neg. 5

Terengganu 5.0 734 148 15.4 469 94 4.4

WP Kuala Lumpur 3.9 713 189 1.5 373 98 0.2


26

Peninsular

Malaysia

4.4 661 152 3.6 398 91 0.7

Sabah¹ 5.2 888 173 23.0 503 97 6.5

Sarawak 4.6 765 167 7.5 482 105 1.1

Malaysia 4.5 691 155 5.7 415 93 1.2

Note: 1 Including the Federal Territory of Labuan

2 Year 2005-as a based methodology 3 PLI-based on Product 4

Based on Gross PLI 5

Less than 0.05 per cent Source: Economic Planning Unit, 2006 (p. 348)

TABLE 2 : The first stage of CFA (CFA first order) of localization

Variable group

Item Factor Loading

1 2 3

Relationship & transparency (3 items)

Immediately solve the problem

Identify the economic potential

bureaucracy process reduced

Easily identify & efficient (3 items) Efficient distribution Promoting local economy quick distribution

Trust in system and institution (3 items) familiar with zakat recipients More reliable not shy when applying zakat χ

2 (df=48)

Comparative fit index (CFI)a

Bollen Relative fit index (RFI)b

Bentler Bonett coefficient (NFI)c

Tucker-Lewis coefficient (TLI)d

Root Mean Square Error of

approximation (RMSEA)e

X10

X14

X17

X11

X12

X15

X1

X3

X4

179.4*

.965

.926

.960

.935

.077

.821

.730

.786

.774

.720

.696

.732

.826

.733

Note: a CFI values of 0.90 and above testifies strong scale unidimensionality

b RFI values close to 1 indicate a very good fit

c NFI values of 0.90 and above testifies strong scale convergent validity

d TLI analysis of moment structures. TLI values close to 1 indicate a very good fit.

e RAMSEA value of about 0.08 or less would indicate a reasonable error of approximation

* p=.000; χ2/df = 7.47; significant at 1% level

TABLE 3: The first stage of CFA (CFA first order) of trust in institution

Variable group

Item Factor Loading


27

1 2

Islamic Institution (3 items)

Malaysian Islamic Development Dept. (JAKIM)

State Islamic Religious Council (SIRC)

Mosque

zakat institution (2 items) State Zakat Institution

State Baitulmal

χ

2 (df=48)

Comparative fit index (CFI)a

Bollen Relative fit index (RFI)b

Bentler Bonett coefficient (NFI)c

Tucker-Lewis coefficient (TLI)d

Root Mean Square Error of approximation

(RMSEA)e

X10

X14

X17

X11

X12

18.84*

.991

.957

.989

.966

.074

.868

.872

.778

.800

.660

Note: a CFI values of 0.90 and above testifies strong scale unidimensionality

b RFI values close to 1 indicate a very good fit

c NFI values of 0.90 and above testifies strong scale convergent validity

d TLI analysis of moment structures. TLI values close to 1 indicate a very good fit.

e RAMSEA value of about 0.08 or less would indicate a reasonable error of approximation

* p=.000; χ2/df = 4.710; significant at 1% level

TABLE 4: Survey Respondents

State Frequency

Selangor 69

(10.00)

Penang 101

(14.70)

Wilayah Persekutuan 130

(18.90)

Malacca 113

(16.40)

Terengganu

Kedah

171

(24.90)

103

(15.0)

Total 687

(100.00) Note: Figures in parentheses are the percentage of the total

Pearson χ 2 test is significant at 1% level

TABLE 5: Categorization of Zakat Institution

Category of zakat institution Frequency

Fully corporatized1

170

(24.7)


28

Partially corporatized2

243

(35.4)

Not corporatized at all3

274

(39.9)

Total 687

(100.00) Note: Figures in parentheses are the percentage of the total 1

Selangor & Penang

2 WP Kuala Lumpur & Malacca

3 Terengganu & Kedah

Pearson χ 2 test is significant at 1% level

TABLE 6: Period of time and amount of zakat received

States Total %

Selangor Penang

WP Kuala

Lumpur Malacca Terengganu

Kedah

Period of time

Less than 3 years 28 0 61 70 75 15 254 37.3

3-5 years 30 33 54 17 67 59 264 38.8

6-8 years 11 33 10 10 14 29 109 16.0

More than 8 years - 35 2 5 10 - 54 7.9

Amount of zakat

received

RM100-RM200

RM201-RM300

RM301-RM400

RM401-RM500

RM501-RM600

RM601-RM700

RM701-RM800

above RM801

Total

0

3

17

26

16

5

2

0

69

2

2

39

41

9

5

0

0

98

15

26

14

16

13

16

20

8

128

107

3

1

1

0

0

0

0

112

10

152

1

0

0

0

0

0

163

0

0

21

36

33

12

1

0

103

134

186

93

120

71

38

23

8

673

19.9

27.6

13.8

17.8

10.5

5.6

3.4

1.2

100.0

Note: Pearson χ 2 test is significant at 1% level

TABLE 7: Distribution of Quality of Life (QOL)

Quality of Life 1 Satisfactory (%) Unsatisfactory (%)

Food and Clothing 75.3 24.7

Transport & Communication 64.9 35.1

Health 59.5 40.5

Child Education

Housing

73.6

67.7

26.4

32.3

Social Participation 83.4 16.6

Overall 2 61.2 38.8

Note: 1

Likert scale 1 = unsatisfactory, 2 = good, 3 = very good


29

2 The overall quality of life

TABLE 8: Religiosity Index (RI)

Total RI1

Index2 No of Respondent (%)

Below than 20

21-30

31-40

41-50

51-60

61-70

71-80

81-90

91-100

Total

2

1

25

47

8

25

42

124

413

687

0.3

0.1

3.6

6.8

1.2

3.6

6.1

18.0

60.1

100.0 Note:

1 KW + KH + KS

2 RI = 86.23 in average

TABLE 9: Attitudes of Zakat Recipient (ATD)

Item Yes No Want to be a zakat payers 580

(84.9)

103

(15.1)

Interested in applying zakat

capital

492

(75.1)

163

(24.9)

Note: ( ) per cent of the total respondents

TABLE 10: Trust in religious institutions (INS)

Institutions Not Believing Believe Strongly Believe Malaysia Islamic Religious

Department (JAKIM)

4

(0.6)

202

(29.6)

477

(69.8)

State Baitulmal 4 299 382

(0.6) (43.6) (55.8)


TABLE 11: Agreement on the concept of Localization (LOC)

Factor 1 Disagree Agree

Relationship & transparency

Easily identify & efficient

Trust in the system and institutions

136

(19.8)

138

(20.1)

136

(19.8)

551

(80.2)

549

(79.9)

551

(80.2)


1 The formation using second factor of the CFA. See Radiah et.al (2010a)


30

TABLE 12: Correlation and covariance of each variable

Estimation Standard Error

Correlation Covariance

ATD <--> INS .133 .011*

.004

QOL <--> ATD .541 .053*

.005

LOC <--> QOL .397 .066* .007

LOC <--> ATD .206 .025* .005

LOC <--> INS .305 .044* .008

QOL <--> INS -.048 -.006

.005

RI <--> INS .383 2.280*

.334

RI <--> ATD .223 1.103*

.194

RI <--> QOL .154 1.059*

.248

RI <--> LOC .255 2.134*

.363

Y <--> EDU .482 .415* .037

Y <--> ATD .450 .141* .015

Y <--> QOL .429 .187* .018

EDU <--> QOL .332 .090* .011

EDU <--> ATD .412 .080* .009


31

χ2 487.51

1

df 92

CFIa .933

RFIb .881

NFIc .919

TLId .901

RMSEAe .079

Note: aCFI values of 0.90 and above testifies strong scale unidimensionality

bRFI values close to 1 indicate a very good fit

cNFI values of 0.90 and above testifies strong scale convergent validity

dTLI analysis of moment structures. TLI values close to 1 indicate a very good fit.

eRAMSEA value of about 0.08 or less would indicate a reasonable error of approximation

* p <0.01 significant at 1% level

1 χ

2/df = 5.299; significant at 1% level

TABLE 13: Regression Result

Model 1 Model 2

Coefficient Standard Error Coefficient Standard Error

RI exogenous

LOC <-- RI .005* .001

QOL <-- RI .003* .001

ATD <-- RI .002* .001

INS <-- RI .007* .001

ATD <-- EDU .069* .015

QOL <-- EDU .083* .020

ATD <-- Y .048* .010

QOL <-- Y .116* .013

ATD <-- QOL .263* .032

LOC <-- QOL .474* .051

RI endogenous

RI <-- LOC

7.057* 1.834

RI <-- QOL

-.201 2.480

RI <-- ATD

8.516* 3.362


32

1

+ +

Model 1 Model 2

Coefficient Standard Error Coefficient Standard Error

RI <-- INS

18.806* 3.421

ATD <-- EDU

.064* .015

QOL <-- EDU

.083* .020

ATD <-- Y

.041* .009

QOL <-- Y

.113* .013

ATD <-- QOL

.286* .033

LOC <-- QOL

.505* .052

Descriptive Measures of Overall Model Fit

χ2/df 5.563*

5.974*

RMSEAe

.082

.085

Descriptive Measures Based on Model Comparisons

CFIa

.926

.919

NFIc

.912

.905

RFIb

.875

.866

TLId

.895

.886

Descriptive Measures of Model Parsimony

PNFIf

.644

.639

AICg

646.09

685.51

ECVIh

.942

.999

Note: aCFI values of 0.90 and above testifies strong scale unidimensionality bRFI values close to 1 indicate a very good fit

cNFI values of 0.90 and above testifies strong scale convergent validity

dTLI analysis of moment structures. TLI values close to 1 indicate a very good fit. eRAMSEA value of about 0.08 or less would indicate a reasonable error of approximation.

fPNFI with higher values indicating a more parsimonious fit

g, h smaller than AIC and ECVI for comparson model

*p<0.01

LIST OF FIGURES:

1

ATD

Want a Zakat Capital

To be zakat Payer

e

e

QOL

EDU Y

+

+

e

e

e

1

1

RI

1 Health and Medical

care

Transportation & Communication

e

e

1

1 e Child education

Housing & Shelter e 1

Food & Clothing

e 1


33

+ +

2.280***

0.91

+

2.134***

0.066***

1.103***

0.415***

0.090*** 0.187***

0.080***

0.141***

1.059***

0.72

0.93

0.76

0.91

2.05

1.92

2.00

2.07

2.05

1.85

1.75

0.67

+

2.27

86.23

Note: The model is adapted from Mikami and Inoguchi, (2008)

FIGURE 1: Theoretical framework and hypothesis of structural behavior of zakat recipients in

the zakat system.

+

+


Attitude

0.87

0.82

Quality of

life

Education Income

1 Health and Medical

care

Transportation & Communication

e

e

1

1 e Child education

Housing & Shelter

e

1

Food & Clothing

e 1

1

Want a Zakat Capital

To be zakat Payer

e

e

1

e

1

Religiosity


34

4.17

Note: Mean structure of the five components in zakat management system by the zakat recipient in all six states as described above each variable. Measurements using SEM model involves the common coefficients, intercepts and covariances. χ

2 / df (df = 60) = 5.299, CFI = 0.933, NFI = 0.919; RFI = 0.881; TLI = 0.901, RMSEA = 0.079. *** p

<0.01. All common coefficients, intercepts and covariances for measurement model are significant at 1% level (asterisks omitted) .

FIGURE 2: The covariance between the variables studied, the mean value and the factor

loading of each variable


Social Participation

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