Analysis of the Role of Zakat on Islamic Banking Performance

Samad, Khairunnisa Abd; Said, Roshima; Nasir, Ida Normaya Mohd; Mahshar, Mursyida; Kamarulzaman, Masrul Hayati

doi:10.1007/978-981-10-6926-0_18

Cited by 6 publications

(12 citation statements)

References 4 publications

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“…Zakat is the obligation toward society (Javaid & Al-Malkawi, 2018). Zakat on business or corporate zakat can be broadly defined as due 2.5 percent of wealth that a company must pay each year based on certain conditions to the eight categories of asnaf (Abd Samad et al, 2018). Malaysian Accounting Standard Board (MASB) defines zakat as an obligatory contribution assessed on certain assets owned by a Muslim that satisfies certain conditions and is to be distributed among specific categories of beneficiaries.…”

Section: Literature Review Corporate Zakatmentioning

confidence: 99%

“…In Malaysia, paying corporate zakat is voluntary due to the absence of law enforcement in Malaysia. This situation discouraged the companies from paying zakat as it is perceived as unimportant and companies would focus more on paying corporate tax than corporate zakat (Abd Samad et al, 2018). They prefer sharing some of their profit to the CSR program rather than paying zakat to zakat institutions (Hasan, 2020).…”

Section: Literature Review Corporate Zakatmentioning

confidence: 99%

“…However, limited studies discuss how the corporate zakat is managed and allocated for CSR initiatives. Most studies on zakat and CSR are conceptual (Harahap, 2021;Selvik, 2018) and focus on CSR disclosures and reporting (Nurul'Iffah & Husni, 2022;Abd Samad et al, 2018, Javaid & Al-Malkawi, 2018Rosman et al, 2019;Hasan, 2020). Studies on zakat and CSR mainly focus on Islamic financial institutions (Jusoh & Ibrahim, 2020;Abu Bakar & Yusof, 2014;Nor & Hashim, 2015) and ignore other industries.…”

Section: Introductionmentioning

confidence: 99%

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Exploring Zakat Distribution Practices for CSR Initiatives: Perspectives of Corporate Zakat Payers in Malaysia

Zaini¹,

Arshad²,

Muda³

2022

IJARBSS

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Companies have become key players in addressing social and environmental challenges. Companies contribute significant financial and non-financial resources to support social initiatives through their Corporate Social Responsibility (CSR). Consequently, companies allocated zakat for their CSR activities and sustainability agenda through wakalah corporate zakat refund. Using this wakalah mechanism, companies as muzakki (zakat payers) receive an assignation of authority to distribute zakat to eligible beneficiaries based on the specific condition after paying a certain amount of zakat to zakat institutions. However, there is limited attention on the corporate zakat distribution practices among corporate zakat payers in Malaysia. Most studies on corporate zakat and CSR focus on Islamic financial institutions, while studies on zakat distribution mainly investigate the practice of zakat institutions. Thus, this study aims to explore and understand the practice of corporate zakat distribution for CSR initiatives among corporate zakat payers in Malaysia. This study applied a qualitative approach where data obtained from interviews with five corporate zakat payers were examined thoroughly. This study identified three main themes in corporate zakat distributions; top management commitment, zakat framework, and stakeholder engagement. This study is expected to contribute to understanding corporate zakat practices in Malaysia and provide insights to encourage companies to manage their zakat fund systematically to support CSR initiatives.

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Section: Literature Review Corporate Zakatmentioning

confidence: 99%

Section: Literature Review Corporate Zakatmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Exploring Zakat Distribution Practices for CSR Initiatives: Perspectives of Corporate Zakat Payers in Malaysia

Zaini¹,

Arshad²,

Muda³

2022

IJARBSS

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“…Samad et al (2015) investigated association between zakat payment and Islamic banks' performance in Malaysian economy and showed a negative relationship between zakat payment and firm performance, whereas revealed positive relation between zakat payment and size of banks. Abd Samad, Said, Mohd Nasir, Mahshar, & Kamarulzaman (2018) analyzed the role of zakat and Islamic banks' performance and showed a positive relationship between firm's size and the amount paid for zakat illustrating an increasing trend in the total assets indicating an increase in the firm's total assets, as the amount of the zakat increases.…”

Section: Islamic Social Financial Activities and Firm Performancementioning

confidence: 99%

Islamic practices and small and medium enterprises performance: Is corporate social responsibility a missing link?

Aziz

Ullah

Mansor

et al. 2020

Journal of Public Affairs

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We examined the role of Islamic practices: Islamic work ethics, Islamic social finance, and religiosity in financial and environmental performances with corporate social responsibility (CSR) as a mediator. We collected data from 241 Pakistani enterprises through survey and applied structural equation modeling in AMOS. The results showed that Islamic work ethics and Islamic social finance have insignificant effects on financial performance but a significant influence on environmental performance. Religiosity has a significant effect on financial but an insignificant influence on environmental performance. Islamic practices significantly improve CSR activities in the SMEs, resulting in financial and environmental performances. Our research further showed that CSR partially mediates the effects of Islamic practices on financial and environmental performances. Top management of the SMEs is suggested to follow Islamic practices in order to configure their performance (financial and environmental). This research suggests policy implications for the policy makers to encourage Islamic practices in business dealing and trading in order to configure CSR and environmental practices.

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“…In contrast to the findings above, only a few studies have found that financial performance is not significantly affected by Zakat contribution. A study bySamad et al (2015) found an insignificant relationship between Zakat and the profitability of the Islamic banks in Malaysiathroughout 2010-2014. The study concluded that the findings may be due to either the Islamic banks paying Zakat based on their own calculations or they do not pay Zakat due to lack of enforcement by the relevant authority.…”

mentioning

confidence: 99%

Zakat As a Corporate Social Responsibility: How Does It Affect the Financial Performance of Islamic Banks?

Ali¹,

Shuib²,

Nor³

2023

JJBA

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Islamic banks should actively engage in Corporate Social Responsibility (CSR) activities as part of their moral obligations to contribute to society and surroundings. This study aims to investigate the influence of Zakat contribution, as a proxy of CSR, on the financial performance of Islamic banks in Malaysia. The study used panel-data analysis, whereby the annual reports of 11 local Islamic banks in Malaysia were analyzed over a ten-year period from 2010 to 2019. Fixed- and random-effect regression model analyses were conducted to analyze the results of the study. The findings reveal that there is a positive and significant relationship between Zakat contribution and the financial performance proxied by Return on Asset (ROA) and Return of Equity (ROE) of the Islamic banks in Malaysia. Hence, the findings of the study confirmed the importance of social elements, like Zakat, in the operations of Islamic banks, as well as in the banks’ performance.

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Analysis of the Role of Zakat on Islamic Banking Performance

Cited by 6 publications

References 4 publications

Exploring Zakat Distribution Practices for CSR Initiatives: Perspectives of Corporate Zakat Payers in Malaysia

Exploring Zakat Distribution Practices for CSR Initiatives: Perspectives of Corporate Zakat Payers in Malaysia

Islamic practices and small and medium enterprises performance: Is corporate social responsibility a missing link?

Zakat As a Corporate Social Responsibility: How Does It Affect the Financial Performance of Islamic Banks?

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