Risk Management of Zakat Management
Dyarini Dyarini and Siti Jamilah
Economic and Business Faculty, University of Muhammadiyah Jakarta, Indonesia
Keywords: Zakat, Risk management, zakat management, zakat institutions.
Abstract: The problem in this research is management of zakat that need to preserve on the credibility and accountability
of the institution of zakat. By maintaining a good reputation and trusted it can facilitate amil in the effort of
collecting funds of zakat from the muzakki. Risk management in zakat management becomes very important
and strategic. The purpose of this paper is to identify risk factors in zakat management, to identify the impacts
of risks, and to identify risk mitigation of zakat management. This writing is a qualitative research where this
research uses primary data through practitioner survey and also secondary data. There are four types of risks
that have been identified and the world of obligations must have a clear concept in mitigating those risks.
First, reputation risk and loss of muzakki; Second, the risk of distribution; Third, operational risk, and the
fourth is the risk of zakat transfer between countries. Empowerment of Zakat in order to change the mindset
of society that zakat is not solely religious obligation which if not done will sin, but charity has social impact
to alleviate poverty. Risk management research is a continuum of steps and efforts towards Shariah
compliance in zakat management.
1 INTRODUCTION
1.1 Background
Zakat is one of the very important pillars in Islam. It
is mentioned so frequently in the holy book, Al -ul-
Karim. Qardawi (2004) notes that some Muslims
scholar places; according to him, the word zakat is
stated 30 times, while 27 occurrences (90%) are
affirmed together with the order of the salat or regular
prayers. This indicates how important zakat is in the
view of Islam. (See also Adnan and Abu Bakar, 2009,
p. 32).
The issues and practices of zakat have remarkably
grown in last few decades. Many Muslims have paid
attention to the understanding and practices of zakat.
Like in Indonesia, many new zakat institutions have
been established since the past two decades, either
linked with or attached to the Government
Institutions, or stand privately. Legally, the
Indonesian government has also issued the Zakat Act
No. 38 of 1999, which is then renewed or improved
by the Zakat Act No. 23 of 2011. The later was even
supported by the Government Rule (Peraturan
Pemerintah-PP) No. 14, 2014.
Referring to the report published by the Baznas
(National Board of Zakat) of Indonesia, it clearly
shows how remarkable the growth of zakat collection
is. For example, in 2003 the total zakat collected was
still Rp.1,307,300,388 equivalent to USD$ 130.730
(with assumption that USD$1 = Rp.10,000), but 10
years later, in 2013 the zakat collected jumped up
very significantly and reached 72 International
Journal of Zakat 2(1) 2017 Rp.50,741,735,216 or
equivalent with USD$5.074.174. This means that the
amount is multiplied almost by 39 times within 10
years, or in average the growth is about 3.9% per year
steadily. Although the zakat collected has grown
significantly, yet it is still much lower than the
potential zakat collection. The Baznas recognizes that
the current collected zakat is only about 1% of total
aggregate potential zakat, which is about Rp. 270T,
or equivalent with USD $270Billion assuming that
USD $1 equal Rp.10,000. This amount is also
believed to be the biggest around the world (El-
Banjari, 2013).
The management of zakat in Indonesia has been
regulated through the Law No. 23 of 2011, replacing
the Law No. 38 of 1999. The law prescribes that there
are two kinds of zakat organizations in Indonesia,
namely BAZNAS (National Board of Zakat),
Dyarini, D. and Jamilah, S.
Risk Management of Zakat Management.
In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 563-568
ISBN: 978-989-758-315-5
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved
563

representing zakat governments throughout
Indonesia, and Amil Zakat institutions managed
privately or publically with approval and
accreditation from the government (the Ministry of
Religious Affairs of the Republic of Indonesia). By
law, National Board of Zakat has the authority to
manage and coordinate with all zakat institutions, in
Indonesia. Currently, BAZNAS has 33
representatives across all provinces of Indonesia.
Hence, BAZNAS is at frontline in national
development, especially related to poverty reduction.
To meets their expected goals, BAZNAS and other
zakat institutions should adopt precise ways to
accurately measure the impact of the program on the
welfare of mutashik. The evaluation should especially
measure how effective the zakat program has been in
improving the lives of mustahik in economic, social,
and spiritual aspects.
Risk management is well-established concept in
financial industry. However, it is still unknown to the
zakat sector. None of zakat institution globally has
implemented risk management in its operation,
although zakat institution may face risk that can
jeopardize zakat operation. For example, ineffective
muzakki complaint management may reduce
muzakki’s trust to zakat institution, and hence, the
institution may lose its collected zakat fund. This is
an example of risk faced zakat institution that needs
to be mitigated and solved. Similarly, failure to
provide audited financial report may end up with
reputation and credibility degradation. People will
question capability and transparency of zakat
institutions.
In the light of the importance of risk management,
working group on zakat discussing technical notes on
risk management for zakat institution was held in
Surabaya on Friday (10/28). It was attended by Azrin
Abdul Mannan (Pusat Pungutan Zakat – PPZ,
Malaysia), Amin Ibrahim (Lembaga Zakat Selangor
– LZS, Malaysia), Syed Zafar Mahmood (Zakat
Foundation of India), Abdallaahi Mohamed (IRTI –
IDB), Nana Mintarti (Board Member of BAZNAS),
and Ascarya (Bank Indonesia). A team of Puskas
BAZNAS comprising Irfan Syauqi Beik, Muhammad
Hasbi Zaenal and Khonsa Tsabita also attended the
meeting (Beik, 2015).
The working group was discussing four groups of
risk: country and transfer risk, reputation risk and lack
of confidence, allocation risk, and operational and
shariah compliant risk. There were 8 types of risks
identified for the first group of risk along with their
definitions and indicators. Meanwhile, 14, 9 and 16
types of risk were identified for the second, third and
fourth group of risk, respectively, along with their
definitions and indicators as well.
These risks should be mitigated and managed.
Otherwise they may create problems that endanger
entire zakat system and operation. Dedicated unit
handling risk issues should be established within the
zakat organization.
In the context of zakat management, then one of
the things that need to be maintained is the credibility
and accountability of zakat management institutions.
Do not let the public distrust due to errors and
violations in the management of zakat.
Maintaining a reputation for zakat amil
institutions is very important. By maintaining a good
reputation and trusted, it can facilitate amil in the
effort of zakat fund collection from the muzakki. Any
form of misconduct and violation in the management
of zakat has the potential to create a bad image of the
institution that has an impact on the risk of losing
muzakki.
1.2 Innovation
Risk management in zakat management becomes
very important and strategic. So far we know the term
of risk management in banking and industry in
general. Whereas zakat institutions also require the
management of these risks. The term of risk
management in the management of zakat is
something that is not commonly heard. In contrast to
the sharia and conventional banking industry where
they are well acquainted with the term of risk
management and even able to identify what is
included in the types of risks that must be managed.
The goal is for banks to minimize the possibilities that
will have a negative impact on the growth of their
industry.
2 LITERATURE REVIEW
2.1 Zakat
Zakat according to the term language is growing,
while the zakat according to the term fiqh is a certain
amount of property that is required by Allah SWT to
be handed over to the rightful ones. The word zakat
means growing, purifying (sanctifying), improving,
which means self-cleansing obtained after the
obligation to pay zakat. (Qardawi, 2001).
Zakat is not something new in the eyes of
Muslims. Muslims strongly believe that zakat is one
of the pillars of Islam. Most Muslims also believe that
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564

zakat has an important role in economic
empowerment of people.
Zakat has a main role in the creation of justice in
the economic field, in which all citizens have a source
of revenue and income to fulfill daily needs for their
life. In management of the use of zakat funds, the
most important is the role of amil zakat (read: Zakat
Institution) as bearers of the trust in management of
the zakat funds. If the amil zakat is good in its
management, then eight of zakat receipts (ashnaf)
will be good anyway. But if the amil zakat is not good
in its management, it should not be expected to ashnaf
will be good too, that is essence of the amil zakat
strategic. In other words, the most important thing of
zakat is how to manage the use of zakat funds
(management). Zakat Institution (OPZ) is the
intermediary organizations based on social.
The entire of operating expense is taken from the
zakat and infaq funds collected. It is also justified by
Sharia, because zakat institutions (OPZ) committee is
Amilin zakat that also included in eight ashnaf
eligible for Zakat. The portion used for operation
activities and Amilin’s salaries.
Zakat system comprising of zakat institution,
zakat collector, zakat recipients (‘ashnaf), and zakat
payer (muzakki) elements, has started to re-emerge in
some Muslim populated countries. Some of them
have already had a well-designed operating
guidelines and regulations. However, in general, the
development of Zakat system is still in the early stage.
To foster the development of Zakat system, it can take
the benefit from the advancement that has been
achieved in the financial market. Learning from
institutional theory, institutional environment that
covers strong legal environment and regulatory
environment, good governance, and socio-economic
impacts are among the important aspects that the
Zakat system can learn from. In the absence of
institutional environment for Zakat development,
there will be the absence of governing rules or
common grounds for Zakat institutions worldwide.
Thus, an international collaboration in terms of
working group is deemed necessary to explore the
potential of zakat development in the future. The
working group came up with principles for effective
and efficient zakat operation including the legal
foundation, governance, risk management, financial
integrity and etc.
3 METHODOLOGY
The present study is a qualitative analysis of data
obtained through a survey of professional in zakat
institutions. Qualitative method was used in this
study. This method involves collecting data from
secondary data. The secondary data was obtained
through library research.
This research is using primary data, which is
obtained by doing in-depth interview with experts
from zakat institutions. In order to synthesize the
problems and make it in priority, second meeting
(interview) with experts is needed to complete pair-
wise questionnaires. In order to choose respondents
in this research is by considering their understanding
about zakat development. The amount of respondent
consists of three experts related to the topic discussed.
There is no maximum or minimum quotes to choose
respondent, the most important things to be
considered is they must have good ability and good
understanding about risk management of zakat
management .
4 RESULTS AND DISCUSSION
4.1 Risk of Zakat Management
It is not easy to identify the risks of non-profit
organizations and their mitigation, as all risks are
connected to all aspects of organizational decision
making. Identification of zakat institutional risk refers
to the identification of risk of non-profit institutions.
Therefore, it should be noted that there are two
aspects related to the risk of disbursement, i.e. from
the management side or zakat institution itself and
from the negative impact of zakat fund distribution to
mustahik. From the management or zakat institution
is obliged to ensure that the process of channelling
zakat funds in accordance with the agreed operating
system procedure. The distribution of zakat funds
must have clear and measurable indicators. Things
that need to be clarified in the disbursement of zakat
funds, among others; standard of mustahic indicator,
poverty limit, effectiveness and efficiency of fund
distribution, time limit of distribution, service
standard, operational cost ratio of distribution
program, etc. In other words, Good Governance
principles such as transparency, accountability,
responsibility, legal certainty, professionalism,
proportionality, etc. should be implemented in the
management of zakat. Moreover zakat is a religious
service (not just managing finances). In the context of
zakat management should consider the conformity of
sharia (sharia compliances).
Risk Management of Zakat Management
565

4.2 Risks in the Process of Raising
Funds
In collecting zakat funds from the muzakki, zakat
institutions will face several risks, including the risk
of trust from the muzakki when entrusted funds to the
zakat institution. There are still many people who do
not believe that the funds to be entrusted it will reach
the hands of the mustahik, both in terms of quantity
of funds and whether or not the delivery of funds. The
public assumes that the nominal zakat will decrease
as it is channelled to the mustahik for administrative
matters. In addition, people also do not know where
the zakat funds will be distributed or in other words
not transparency which local community will be
disbursed zakat funds. This is what makes people less
believe that zakat funds will be on target in
accordance with the expectations of society so that
people feel more satisfied and calm if the zakat funds
distributed individually.
The risk above is due to lack of socialization and
education to the public regarding the tasks and
profiles of zakat institutions and the advantages
gained by entrusting zakat funds in zakat institutions.
Starting from the society's assumption about the zakat
institution that the zakat institution already has lists
of people who are entitled to receive the zakat funds
and zakat institutions have made a priority list of
people who first to be disbursed the zakat funds. This
is what needs to be socialized to the public.
Other causes of the risks above, namely the lack
of education and supervision of human resources
institutions zakat (amil or zakat officer). The amil
needs to be educated on how to receive zakat funds
from the community, either from the administrative
process or from the process of collecting the funds
from the community (whether sorted or mixed
together).
From these risks, can be solved with some
solutions of the following:
 Provide regular socialization to the public about
the profile and role of zakat institutions in
managing zakat funds
 Zakat institutions should be able to blend in
other ways to make people believe in the role of
zakat institutions
 Providing education to amil zakat in the process
of collecting funds from the muzakki, both from
the administrative process and from the process
of collecting the funds of the zakat from the
community in accordance with the approved
agreement.
4.3 Risks in the Process of Managing
Funds
In the process of managing the funds, the zakat
institution is tasked with ensuring that the zakat funds
received are able to meet the number of zakat
receivers. The zakat institution will arrange for the
zakat funds that they collect can be channelled to the
post (ashnaf) in accordance with the recommended
and established by Islamic Shari'a.
In the process of managing this fund, zakat
institutions will face the risk of incompatibility of the
amount of funds raised by the number of mustahiq
they have listed. This can happen because too much
the number of priorities of the mustahiq and could
also be due to lack of expert amil in dividing the funds
he collected.
In addition, with regard to the function of zakat
funds, zakat institutions have only managed funds for
the mustahiq for consumptive purposes only, not for
productive interest that can be sustainable. From the
fact that it can be said that zakat institutions can also
face the risk of zakat management of productive
funds that are still lacking (not appropriate).
From these risks, can be solved with some
solutions of the following:
 Amil zakat should be more complete in listing
the eight ashnaf and more thoroughly in making
the list of priorities of the recipients of zakat.
 Educate the amil so that experts in managing
zakat funds
 Adding donor funds by keeping trust of donors
(muzakki).
 Make standardization and guidance in zakat
management.
 Cooperate with other parties to create a
consumptive and productive management of
zakat funds.
4.4 Risks in Fund Disbursement
Process
In the process of distributing zakat funds, zakat
institutions will face the risk of improper targeting
and the level of efficiency and effectiveness level of
less channelling. The risk of improper targeting can
be due to the lack of data of the mustahiq belonging
to the depth of ashnaf. This can happen because of
lack of understanding zakat amil about the criteria of
each class of eight ashnaf. In addition, this can also
occur because the zakat amil to charge to distribute
zakat funds is not mandatory. As a result, the
distribution of zakat funds becomes uneven and there
will be parties who are tyrannized.
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The risk of efficiency level and level of
effectiveness of disbursement that is less related to
the function of the fund disbursed or can be said with
the risk of inappropriate fund utilization.
From these risks, can be solved with some
solutions of the following:
 Chosen zakat amil must be honest and trustful
 The zakat institution needs to do routine
education to understand the criteria of each of
the eight ashnaf
 The zakat institution needs to supervise and
control the amil in charge of distributing zakat
funds, whether it really has reached the parties
that really need
 Strong administrative and reporting systems
 Cooperate with other parties to create a
consumptive and productive management of
zakat funds.
Simply put, risk can be interpreted as a situation
that can create opportunities for a threat that can cause
negative impacts of loss of something valuable, such
as reputation and trust. According to Godfrey (1996),
when referring to an analysis of the probability of
occurrence of the risks and the effects of those risks,
there are four possible levels of risk acceptability:
unacceptable, undesirable (risk should be avoided),
acceptable (acceptable but manageable risks), and
negligible (negligible risk because it has no
significant effect).
With these four levels of risk acceptance, zakat
institutions need to identify with regard to any risks
that may arise in zakat management activities, how
they impact, and how to mitigate those risks through
appropriate and effective actions and steps. During
this time, risk management has not been well known
in the world of zakat management. In fact, there are
many negative impacts that can be generated when an
event that actually can be anticipated before through
the implementation of good risk management.
For example, in the distribution of zakat for the
scholarship program, then among the risks that may
occur is the risk of delay in the process of disbursing
the scholarship funds to the mustahik account.
Though this delay has the potential to create
problems, namely the issuance of the mustahik from
the school / campus where he studied. If this happens,
then it is potentially damaging the good name of the
zakat institution.
Therefore, appropriate mitigation measures are
required. For example, by contacting the school
authority / campus where the mustahic study is
concerned. If this is done, it is necessary to regulate
who the amil officer is responsible for contacting the
school / campus and conveying information on the
delay of this disbursement.
Another example is the risk of zakat collection.
For example, the risk of lack of information on zakat
management by institutions to the muzakki, whereas
they have zaked regularly to the institution. The
implication that can be caused is the decreasing of
trust level of muzakki to the institution. Therefore,
appropriate mitigation measures are needed. For
example, by hastening regular reports of zakat
management to muzakki directly with accompanying
apologies for the delay in submitting this information.
It should be incorporated into standard operating
procedures of the institution.
The development of the world of zakat and
Islamic philanthropy is now growing rapidly and
requires good risk management capabilities in order
to continue to be trusted by the community. The
world of zakat and Islamic philanthropy is now
increasingly dynamic. At the same time, the higher
the ability of zakat institutions to manage zakat, infak
and alms in Indonesia. In this situation also required
public trust in zakat management institution (LPZ).
And to continue to maintain the trust given by this
society, zalcat institutions must be able to show the
quality of management is good and transparent.
In order for the info to be more widespread, there
should be adequate information from zakat
institutions. How do they take care of themselves
seriously so as not to deviate from the trust given by
society to the existing zakat institution. Society must
know and also understand that there are efforts to
safeguard, commitment and supervision of the values
of honesty and goodness in managing zakat.
In its implementation, an institution of zakat must
have clear systems and procedures in collecting,
managing and utilizing its institutions. This is none
other because zakat institutions manage community
trust and every mandate must be accounted properly
through various methods and approaches.
Nevertheless, the future of this modern zakat
management will rely heavily on public trust.
This belief itself is not a blank check, there must
be proving the ability of zakat management
institutions in maintaining this trust in its real form,
especially in maintaining the reputation of each
institution. And speaking of this reputation, it turns
out he entered into the risk management of zakat
management.
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567

5 CONCLUSIONS
According to research, it is known that the characters
muzakki (donors) today want to know where their
zakat funds channelled. This shows the urgency of
risk mitigation of zakat distribution to priority for
review because it is associated with other risks.
Because one of the performance achievements amil
zakat now began to shift no longer simply measured
from how zakat funds collected, but how much
benefit is perceived by the recipient of zakat funds.
But also amil zakat demanded to be able to transform
mustahik conditions become independent.
The distribution of zakat funds must have clear
and measurable indicators. Things that need to be
clarified in the distribution of zakat funds, among
others: standards mustahik indicator, poverty limit,
effectiveness and efficiency of fund distribution,
delivery time limit, service standards, and others. In
other words, principles such as transparency,
accountability, responsibility, legal certainty,
professionalism, proportionality, must be
implemented in the management of zakat. Moreover
zakat is a religious service (not just managing
finances). In the context of zakat management should
consider the conformity of sharia (sharia
compliance).
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