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Can disclosure practices and stakeholder management influence zakat payers’ trust? A Malaysian evidence

Article

Can disclosure practices and stakeholder management influence zakat payers’ trust? A Malaysian evidence

Abstract

This study examines whether disclosure practices and stakeholder management play an important role in influencing the zakat payers' trust in the zakat institutions in Malaysia. A regression analysis was performed to examine the relationship between disclosure practices and stakeholder management of the zakat institutions on zakat payers' trust. Using questionnaire survey on 184 zakat payers, this study shows that the disclosure practices do influence the zakat payers' trust in the zakat institutions. However, it is revealed that stakeholder management does not influence the zakat payers' trust in zakat institutions. The findings in this study imply that the zakat institutions should focus on the transparency of disclosure practices. The findings in this research could assist the zakat institutions to increase the trust level of the zakat taxpayers towards them and assist the policy makers in establishing zakat institutions which would be perceived by the public as legitimate.
Can disclosure practices and stakeholder management influence zakat payers’ trust? | BEH: www.beh.pradec.eu
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© 2018 Prague Development Center
Peer-reviewed and Open access journal
ISSN: 1804-5006 | www.academicpublishingplatforms.com
BEH - Business and Economic Horizons
Volume 14 | Issue 4 | 2018 |pp.882-893
The primary version of the journal is the on-line version
DOI: http://dx.doi.org/10.15208/beh.2018.60
Can disclosure practices and stakeholder
management influence zakat payers' trust?
A Malaysian evidence
Nahla Samargandi,1 Sakinah Mohamed Tajularifin,2 Erlane K Ghani,3
Asmah Abdul Aziz,2 Ardi Gunardi4
1Faculty of Economics and Management, King AbdulAziz University, Saudi Arabia
2Faculty of Accountancy, Universiti Teknologi MARA, Malaysia
3Accounting Research Institute, Universiti Teknologi MARA, Malaysia
4Faculty of Economics and Business, Universitas Pasundan, Indonesia
corresponding e-mail: erlanekg[at]yahoo(dot)com
address: Accounting Research Institute, Level 12, Menara SAAS, Universiti Teknologi MARA,
Shah Alam, 40250, Selangor, Malaysia
Abstract: This study examines whether disclosure practices and stakeholder management play an important
role in influencing the zakat payers' trust in the zakat institutions in Malaysia. A regression analysis was
performed to examine the relationship between disclosure practices and stakeholder manage ment of the
zakat institutions on zakat payers' trust. Using questionnaire survey on 184 zakat payers, this study shows
that the disclosure practices do influence the zakat payers' trust in the zakat institutions. However, it is
revealed that stakeholder management does not influence the zakat payers' trust in zakat institutions. The
findings in this study imply that the zakat institutions should focus on the transparency of disclosure
practices. The findings in this research could assist the zakat institutions to increase the trust level of the
zakat taxpayers towards them and assist the policy makers in esta blishing zakat institutions which would be
perceived by the public as legitimate.
JEL Classifications: G30, G34, M40
Keywords: Zakat payers' trust level, disclosure practices, stakeholder management, zakat institutions
Citation: Samargandi, N., Tajularifin, S. M., Ghani, E. K., Aziz, A. A., & Gunardi, A . (2018). Can disclosure
practices and stakeholder management influence zakat payers' trust? A Malaysian evidence. Business and
Economic Horizons, 14(4), 882-893. http://dx.doi.org/10.15208/beh.2018.60
1. Introduction
Over the years, zakat institutions in most Muslim countries have recorded a low amount
of zakat collection in comparison to the income tax collection. Such low amount of zakat
collection could be due to the lack of trust in zakat institutions among the zakat payers
(Salleh, 2006; Ahmad & Main, 2014). The lack of trust is evidenced by the small amount
of zakat collection in relative to total Muslim populations in Malaysia. For example,
Lembaga Zakat Selangor, a zakat institution, in 2010 obtained zakat contributions from
only 142,029 contributors out of the 5.4 million Muslim populations; an amount that
represents only a small percentage of the total Muslim populations. Studies have suggested
that the small amount of zakat collection is attributed by the zakat payers' lack of trust in
the zakat institutions (Abioyea et al., 2011).
Trust plays an important role in the zakat institutions as their survival depends on the
amount of zakat collections from the zakat payers. This is consistent with Sargeant & Lee
(2002) who argue that donors' trust plays a significant role in charitable organisations in
which the donation would ensure the activities be run and, eventually, lead to
sustainability of the charitable organisations. Trust involves a trusting party that believes
... However, in another study, transparency has no significant effect on zakat payments through OPZ. Based on research conducted by Thaha (2015) in Samargandi (2018), it is stated that Malaysia's zakat financial statements are not fully disclosed to the public; this has no significant effect on zakat payments through OPZ (Samargandi et al., 2018). ...
... However, in another study, transparency has no significant effect on zakat payments through OPZ. Based on research conducted by Thaha (2015) in Samargandi (2018), it is stated that Malaysia's zakat financial statements are not fully disclosed to the public; this has no significant effect on zakat payments through OPZ (Samargandi et al., 2018). ...
... This is in line with agency theory, where the zakat institution as an agent reports in full (Full Disclosure) all activities to the muzakki (principal) so that there is no suspicion. The results of this study are in line with Samargandi's (2018) research that disclosure practices have a significant effect on muzakki's trust (Samargandi et al., 2018). 4. The effect of muzakki background on zakat trust through OPZ The fifth hypothesis (H5) states that Muzakki's background has a significant positive effect on zakat trust through OPZ is rejected. ...
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This research aims to identify the factors that influence trust in paying zakat through zakat management organization (OPZ) or zakat institution in Indonesia. The theory in conducting this research is based on agency theory and legitimacy theory. This research is a quantitative descriptive research using primary data in the form of questionnaires distributed online using the Structural Equation Model (SEM) analysis tool. The population in the research is the Muslim population in Indonesia, who are obliged to pay zakat. Samples were taken randomly using the Simple Random Sampling method for as many as 100 respondents in 40 cities spread across Indonesia. The results showed that Muzakki's Perception of Management and Transparency Practices had a significant positive effect on trust in paying zakat through zakat institutions. Meanwhile, Muzakki's Perception of Zakat Institutions and Muzakki's Background has no significant effect on trust in paying zakat through zakat institutions. These findings are expected to be a serious concern for stakeholders in educating the Muslim community about the importance of paying zakat through zakat institutions in order to reduce income inequality and achieve economic prosperity in Indonesia. The results showed that Muzakki's Perception of Management and Transparency Practices had a significant positive effect on trust in paying zakat through zakat institutions. Meanwhile, Muzakki's Perception of Zakat Institutions and Muzakki's Background has no significant effect on trust in paying zakat through zakat institutions. These findings are expected to be a serious concern for stakeholders in educating the Muslim community about the importance of paying zakat through zakat institutions in order to reduce income inequality and achieve economic prosperity in Indonesia. The results showed that Muzakki's Perception of Management and Transparency Practices had a significant positive effect on trust in paying zakat through zakat institutions. Meanwhile, Muzakki's Perception of Zakat Institutions and Muzakki's Background has no significant effect on trust in paying zakat through zakat institutions. These findings are expected to be a serious concern for stakeholders in educating the Muslim community about the importance of paying zakat through zakat institutions in order to reduce income inequality and achieve economic prosperity in Indonesia.
... Yahaya & Ahmad (2019) examined the factors that influence trust in the distribution of zakat funds in Selangor. Meanwhile, Samargandi et al. (2018) showed that the faith of zakat payers in the zakat collection and distribution process carried out by LAZ is essential to increase zakat usage in this research by using the online platform of zakat application (e-Zakat Usage). The online zakat platform is a platform to facilitate zakat payers to update their accounts by simply registering as a user on the portal and online users can check zakat payment information for a year, print zakat reports, update personal information, and fulfill zakat. ...
... Financial statements serve as a reliable means of assessing the success of the management and financial condition of an organisation as noted by Samargandi, Tajularifin, Ghani, Aziz & Gunardi [35]. These financial statements contain information that is valuable for various people and it is therefore the responsibility of the zakat board of management to ensure their credibility as documents as noted by Karim [36]. ...
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There is an indication that zakat institutions are inefficient and lack transparency in terms of distributing and managing their funds. This leads to a lack of trust between Muzakee and zakat institutions; hence, they prefer to pay zakat to Mustahiq directly. This means that zakat institutions may be collecting far less in zakat funds than the maximum amount that is potentially available. Meanwhile, the invention of blockchain technology has disrupted the financial sector as it offers transparency in transactions, meaning intermediaries are no longer needed. The use of blockchain in zakat management is important for improving transparency in the distribution of zakat. The objective of this paper is to explore the determinant factors that influence trust in zakat institutions using blockchain technology as a mediating effect. The results of the literature review revealed that these factors are reputation, satisfaction with zakat distribution, service quality and disclosure practice. This study expects that trust in zakat institutions can be enhanced through the use of blockchain technology.
... Second, transparency is essential to generate public trust in zakat institutions (Nurhayati et al., 2014). Therefore, financial information disclosure is imperative to enhance trust and hinder negative perceptions on zakat management across zakat institutions (Samargandi et al., 2018). ...
... Official website should ensure enough information available such as the process of zakat application, programs conducted, zakat distribution summary, method of zakat payment and other relevant data. However, there are some challenges in collecting relevant zakat information especially on the reporting aspects (Samargandi et al., 2018;Sapingi, Nelson & Obid, 2018;Sulaiman, Che Cob, & Ali 2015). A study found that only 7% of the respondent gathered zakat information through official zakat website while other channel used are through relative friends, newspaper, memo and radio (Raja Ahmad, Amiruddin Othman, & Salleh, 2015). ...
... The contracts in distributing zakat should fulfil sharia requirements, social needs and capabilities well (Ahmed, 2011 (Samargandi et al., 2018). Fundraising (F1) will be escalated, hence, maximisation of fund distribution (F3) to promote the welfare and prevent harmfulness as well as poverty alleviation (Ahmed, 2011;Zakaria et al., 2014). ...
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