Internal Factors Affecting the Intention to Pay Zakat and the

Selection of Formal Zakat Institutions on Generation Y in Indonesia

Arief Budiman and Erza Fikriani Rahmah

Faculty of Economics and Business, Lambung Mangkurat University, Banjarmasin, Indonesia

arief.budiman@unlam.ac.id

Keywords: Zakat, Consumer Behaviour, Religiosity, Generation Y, Altruism.

Abstract: This research aims to invistigate and analyze the internal factors affecting intention to pay zakat and the

selection of formal zakat institutions on Generation Y in Indonesia. The object of this study was Generation

Y (22-40 years old) in Indonesia and obliged to pay zakat with the number of samples taken were 100

respondents. The sampling technique used was purposive sampling and Structural Equational Model-Partial

Least Square (SEM-PLS) with SmartPLS version 3 as the tool for data analysis. The results showed that

religiosity and susceptibility to interpersonal influence has a positive and significant effect on the intention to

pay zakat. Altruism has a negative and significant effect on the intention to pay zakat. Intention to pay zakat

has a positive and significant effect on the selection of formal zakat institution on Generation Y in Indonesia

Implications for the future direction, the government and zakat institutions is expected to create public

awareness and a policy to improve zakat activity. This activity should be supported by zakat distribution

facilities such as the Zakat Collector Unit in government and private institutions.

1 INTRODUCTION

Indonesia is the largest Muslim population in the

world with the total population of Indonesian 2015 is

255.461.700 people and there are about 207 million

Muslim in it or about 87% of total population in

Indonesia is Muslim (Badan Pusat Statistik

Indonesia, 2012). Based on the large Muslim

population in Indonesia, the estimation and the

potential of zakat revenue in Indonesia is also very

large.

To empower the potential of zakat, an institution

is required to collect and distribute zakat funds

properly. According to the Law Number 23 Year

2011 about Zakat Management, there are actually

some institutions beside Indonesian National Amil

Zakat Institution (BAZNAS) which can collect zakat

funds from people, that is called Amil Zakat

Institution (Lembaga Amil Zakat). However,

research on zakat and the behavior of muzakki in the

literature is very limited particularly in Indonesia.

This study is focused on internal factors of muzakki

such as religiosity, altruism, susceptibility to

interpersonal influence, and the intention to pay zakat

and this study was to analyze the effect of religiosity,

altruism, and susceptibility to interpersonal influence

on the intention to pay zakat and the intention to pay

zakat on the selection of formal zakat institutions.

In the marketing literature, there is available

cohort or segment that affects behavior or decision-

making. Brosdahl and Carpenter’s (2011)

categorization of generations, using the following

birth dates for each cohort: the Silent Generation

(1925-1945), the Baby Boomers (1946-1960),

Generation X (1961-1981) and Generation Y (born

after 1981). The later Generation was born in the era

of information technology and education world

development, so it has different characteristics than

the previous generation.

2 LITERATURE REVIEW

Zakat is the command of Allah Subhanahu Wa-Ta’ala

obligated to the Muslims who meet certain

requirements. While in term, zakat is a part of wealth

with certain requirements, required by Allah

Subhanahu Wa-Ta’ala to the owner to be given to the

right people with certain requirements as well

(Sariningrum, 2011). A person who is obliged to pay

zakat is called muzakki. Muzakki is a person who is

charged with the obligation to expend certain parts of

832

Budiman, A. and Rahmah, E.

Internal Factors Affecting the Intention to Pay Zakat and the Selection of Formal Zakat Institutions on Generation Y in Indonesia.

In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 832-837

ISBN: 978-989-758-315-5

his/her wealth to be given to those who have a right

to receive it (Rais, 2009).

In this study, internal factors were the factors

inside a person that influence him/her to pay zakat

and select zakat institutions, which were the effect of

religiosity, altruism, and susceptibility to

interpersonal influence to intention to pay zakat and

the intention to pay zakat to the selection of formal

zakat institutions.

Religiosity is described as the consistency

between beliefs of religion as a cognitive elemet, the

feeling of religion as an affective element and

behavior towards religion as a psychomotor element

(Rahmat, 1996). Stark and Glock (1968) as in the

book Sociology of Religion mentions five dimensions

of religion, namely ideological, ritualistic,

experiencional, intellectual, and consequentional.

According to research done by Charseatd (2016)

entitled Role of Religious Beliefs in Blood Donation

Behavior Among the Youngster in Iran: A Theory of

Planned Behavior Perspective, religiosity has positive

effect on the attitude toward donation. Thus,

H1: Religiosity will have a positive and significant

effect on the intention to pay zakat on

Generation Y in Indonesia.

Altruism is an unselfish interest in helping others

(Santrock, 2003). Altruism is a behavior that is

controlled by feelings of responsibility towards

others, such as helping and sharing (Kail and

Cavanough, 2000). According to Cohen (1972), there

are three characteristics of altruism behavior, that are

empathy, willingness to give, and voluntary. Altruism

is identified as the reason for someone to donate

(Abreu, 2015). According to Germain’s (2007) study,

individuals who have a sense of altruism will more

often donor. Thus,

H2: Altruism will have a positive and significant

effect on the intention to pay zakat on

Generation Y in Indonesia.

Susceptibility to Interpersonal Influence is the

need to identify with or enchance one’s image in the

opinion significant others through the acquisition and

use of products and brands, the willingness to

conform to the expectations of others regarding

purchase decisions, and/or the tendency to learn about

products and services by observing others or seeking

information from others (Netemayer et al., 1989).

According to Bearden et al. (1992) there are two

aspects of interpersonal influence, that is normative

component and informational component.

Research conducted by Anthony et al. (2016)

shows that susceptibility has positive effect on

intention to buy products mainly through normative

dimension. Research also shows that interpersonal

influence can have an effect on information

processing, the development of attitudes and purchase

behavior (Park and Lessig, 1977; Bearden and Etzel,

1982; Bearden et al., 1989). Thus,

H3: Susceptibility to interpersonal influence will

have a positive and significant effect on

intention to pay zakat on Generation Y in

Indonesia.

Intention according to Fishbein and Ajzen (1975)

is a component inside an individual that refers to the

desire to perform certain behaviors. In addition,

Ancok (1992) states that the intention can be defined

as a motive of a person to perform a behavior.

Research on public intentions on elections has been

conducted several times, namely (Javad, 2013)

conducts research on the intention of Iranian society

in choosing global or local brands. The results show

that Iranian people's intention is greater in buying

global or foreign branded products. Thus,

H4: Intention to pay zakat will have a positive and

significant effect on the selection of formal

zakat institutions on Generation Y in Indonesia.

3 METHODOLOGY

The type of this research is explanatory research

using quantitative approach. This research used

primary and secondary data. In this study, primary

data was collected by questionnaire distribution.

Questionnaire is designed using likert scale. While

the secondary data was collected from books,

journals, articles from the internet, and data from

government and private institutes.The object of this

study is muzakki (a person who is obliged to pay

zakat) with criterias, are Generation Y (born 1977-

1994) and live in Indonesia. The population of this

study is Generation Y (born 1977-1994) or aged 22-

40 years old who are muslims and live in Indonesia.

The sample was determined using nonprobability

sampling technique, which is purposive sampling.

According to Sugiyono (2016purposive sampling is a

technique of determining the sample with certain

considerations. This study uses PLS analysis method

(Partial Least Square). Ghozali (2014) explains that

PLS is a soft modeling analysis method because it

does not assume that data must be measured on a

certain scale, meaning that the sample size can be

small (under 100 samples).The previous study used

SEM-PLS analysis method conducted by Chow and

Shi (2014) employed 100 samples. Reviewed from

the previous research, this study used 100 people as

Internal Factors Affecting the Intention to Pay Zakat and the Selection of Formal Zakat Institutions on Generation Y in Indonesia

833

samples, with certain considerations, which are

Indonesian people and categorized to Generation Y,

aged 22-40 years old. This study used Structural

Equation Model - Partial Least Square (SEM-PLS)

method using SmartPLS software version 3.0 and

preliminary data analysis using SPSS software

version 16.

4 RESULTS AND DISCUSSION

Primary data were collected from questionnaires

distributed in several government institutions, private

companies, and to those who paid zakat in formal

zakat institutions with criterias were belong to

Generation Y (aged 22-40 years old) with total of 110

questionnaires and after data screening is done, there

were 100 questionnaires that used for further data

analysis.

The respondents included in this study were

muzakki (person who is obliged to pay zakat) which

belongs to Generation Y aged 22 years up to 40 years

old. The percentage of muzakki aged 23, 27, and 33

years old was 1%, 22, 26, and 36 years old was 2%,

29 and 39 years old was 3%, 34 years old was 5%, 25,

31 and 37 years old is 6% 28, 32, and 38 years old

was 7%, 30 years old was 8%, 35 years old was 10%,

and the majority of muzakki’s age who pay zakat was

40 years as 16%. The percentage of male muzakki is

47% and female muzakki is 53%. The percentage of

muzakki with high school education / equivalent was

14%, diploma / D3 was 18%, bachelor / S1 / D4 was

54%, and master / S2 was 14%. The majority of

muzakki who pay zakat was muzakki with education

bachelor / S1 / D4. The percentage of muzakki who

pays zakat in South Kalimantan BAZNAS was 36%,

Banjarmasin BAZNAS was 15%, Rumah Zakat of

South Kalimantan was 2%, LAZISMU was 7%,

Rumah Yatim was 7%, Griya Yatim dan Dhuafa was

3%, Dhuafa Tersenyum was 3% , and more than one

zakat institution was 27%. The majority of muzakki

pay zakat in South Kalimantan BAZNAS which was

36%.

Preliminary data analysis in this study consists of

reliability test, one of the most commonly used

approaches to assest reliability. Variable was

considered acceptable, if the Cronbach’s Alphas were

≥ 0.60 (Hair et al., 2006). Reliability analyses using

Cronbach’s alphas resulted in 0.904 for religiosity,

0.895 for altruism, 0.894 for susceptibility to

interpersonal influence, 0.897 for intention to pay

zakat, and 0.855 for the selection of formal zakat

institutions.

The adequacy of the outer-measurement model of

constructs is assessed through some criteria such as

individual item loading, composite reliability,

average variance explained (AVE), bootstrap t-

statistic, convergent validity, and disciminant

validity.

Table 1: Measurement Model Results

Variable

AVE

Composite

Reliability

Religiosity

0.424

0.915

Altruism

0.400

0.837

Susceptibility to

Interpersonal

Influence

0.483

0.911

Intention to Pay

Zakat

0.831

0.936

The Selection of

Formal Zakat

Institutions

0.634

0.896

According to Sureshchandar et al. (2001),

convergent validity refers to the degree to which the

various approaches to construct measurement are

similar to (converge on) other approaches that they

theoretically should be similar with. In PLS,

convergent validity is assessed by average variance

extracted (AVE), which measures the ratio of the

amount of variance that a latent variables captures in

its’ indicator relative to the amount due to

measurement error (Chin, 1998; Fornell and Larcker,

1981). As shown in Table 1, intention to pay zakat

and the selection of formal zakat institutions

exceeded 0.50. Religiosity and susceptibility to

interpersonal influence exceeded 0.40, which are

0.424 and 0.483. Altruism was on cut off point, which

is 0.400. However, it is accepted in the marketing

literature that AVE values, which are higher than a

benchmark of .40 are useable (O’Cass and Julian

2003).

Table 2: Correlation among Constructs.

Variable

Altruism

0.632

Intention to Pay

Zakat

0.266

0.911

The Selection of

Formal Zakat

Institutions

0.177

0.587

0.796

Religiosity

0.382

0.274

0.182

0.651

Susceptibility to

Interpersonal

Influence

0.280

0.230

0.204

-0.227

0.695

According to Hulland (1999), discriminant

validity refers to the extent to which measures of a

given construct differ from measures from other

constructs in the same model. Fornell and Larcker

ICIEBP 2017 - 1st International Conference on Islamic Economics, Business and Philanthropy

834

(1981) suggest to assess discriminant validity by

comparing the square root of average variance

extracted (AVE) for each constructs with the

correlation between the construct and other constructs

in the model. The discriminant validity is established

if the square root of the AVE of each construct is

larger than the correlation between the construct and

any other construct in the model (MacMillan et al.,

2005). As suggested by MacMillan et al. (2005),

discriminant validity is determined by looking down

the columns and across the row. For satisfactory

discriminant validity, the diagonal element should be

significantly greater that the off-diagonal elements in

the corresponding rows and columns (Hulland, 1999;

MacMillan et al., 2005).

Table 3: PLS Results for the Theoretical Model.

Hyp

Path Weight

Critical Ratio

0,472*

2,015*

-0,381^

0.284

1,989*

0,231*

2,510*

0,208*

0.387

1,988*

0,566*

7,542*

AVE

0,34

The inner model or structural model focuses on

the hypothesised relationships among the latent

constructs. PLS is employing bootstrapping, that was

first introduced by Efron (1979), as re-sampling

technique to determine the significant of the paths

(Chin, 1998). Bootstrapping generates a certain

number of sub-samples by randomly choosing a case

from the original data set. Each case in the earliest

sample is provided a uniform probability. As

recommended by Chin (1998), the bootstrap critical

ratios for the path estimates should be greater than

1.96 (p<0.05). Table 3 presents the hypotheses of the

study and shows the path coefficient between the

exogenous and endogenous variables, average

variance accounted (AVA) for, R2 and critical ratios.

The AVA for the endogenous variable was 0.34 and

the individual R2 are greater than the recommended

.10 (Falk and Miller, 1992), except for H1 and H8. As

suggested by Falk and Miller (1992), the significance

of the individual path was assessed by calculating the

product of the path and the correlation coefficient.

The cut-off point for the path coefficient is 0.015

(15%) of the variance, as recommended by O’Cass

(2003).

As shown on Table 3, critical ratios exceeded the

benchmark of 1.96; ρ<0.05. Thus, all of hypothesis

were significant. Religiosity has positive and

significant effect on the intention to pay zakat (β=

0.472, t= 2.015, ρ= 0.044), so H1 was supported.

Altruism had negative and significant effect on the

intention to pay zakat (β= -0.381, t= 1.989, ρ= 0.047),

so H2 was not supported. Susceptibility to

interpersonal influence has positive and significant

effect on the intention to pay zakat (β=0.231, t=

2.510, ρ= 0.012), so H3 was supported. Intention to

pay zakat has positive and significant effect on the

selection of formal zakat institutions (β=0.566, t=

7.542, ρ= 0.000), so H4 was supported.

The results show that religiosity has a positive and

significant effect on the intention to pay zakat, so H1

was supported. It means the greater the level of

religiosity of a person, the greater him/her intention

to pay zakat. This result is in line with the result of

Rouf's (2011) study, which explains that a person's

understanding of syariah norms, especially related to

zakat greatly effects that person's awareness to pay

zakat. Altruism is identified as the reason for

someone to donate (Abreu, 2015). But the results

show that altruism has a negative and significant

effect on the intention to pay zakat, so H2 was not

supported. It means the level of altruism of a person

can’t depend his/her intention to pay zakat.

The results show that susceptibility to

interpersonal influence has a positive and significant

effect on the intention to pay zakat, so H3 was

supported. It means the greater the susceptibility to

interpersonal influence of a person, be the greater

him/her intention to pay zakat. This result is in line

with the research conducted by Park and Lessig

(1977), Bearden and Etzel (1982) and Bearden et al.

(1989) that shows interpersonal influence can have an

effect on information processing, the development of

attitudes and purchase behavior. Intention to pay

zakat has a positive and significant effect on the

selection of formal zakat institutions, so H4 was

supported. It means the greater the intention of

someone (in this study is Generation Y) to pay zakat,

the greater the possibility of that person to choose a

formal zakat institution as a place to pay zakat.

Implications for the future direction, it is expected

that the government and zakat institutions can create

public awareness and policy to improve the zakat

activity. This policy aims to give people religious

knowledges and improve the level of people’s faith.

It is expected that the government, zakat institutions,

and ourselves can encourage people to participate in

paying zakat regularly, such as through socialization.

This activity should also be supported by zakat

distribution facilities such as the Zakat Collector Unit

in the government and private institutions.

The intention to pay zakat in a formal zakat

institution can also be enhanced by socializing the

ease and safety of paying zakat in a formal zakat

institution. Then, by developing supporting facilities,

Internal Factors Affecting the Intention to Pay Zakat and the Selection of Formal Zakat Institutions on Generation Y in Indonesia

835

such are websites and social media to access

information about zakat institutions, reports on the

collection and distribution of zakat funds, data of the

zakat recipients, donation activities for the needy, and

many more

5 CONCLUSIONS

Religiosity has positive and significant effect on

intention to pay zakat. Altruism has negative and

significant effect on intention to pay zakat.

Susceptibility to interpersonal influence has positive

and significant effect on intention to pay zakat.

Intention to pay zakat has positive and significant

effect on the selection of formal zakat institutions.

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