Developing an Investment Model for Productive Management of Zakat Funds by Lembaga Zakat Negeri Kedah (S/O 14286)

• Main Authors: Sawandi, Norfaiezah, Abdul Aziz, Norazita Marina, Saad, Ram Al Jaffri
• Format: Monograph
• Language: English
• Published: UUM 2021
• Subjects: HG Finance
• Online Access: https://repo.uum.edu.my/id/eprint/30173/1/14286.pdf; https://repo.uum.edu.my/id/eprint/30173/
• Institution: Universiti Utara Malaysia

Given the importance of zakat to the economy and society, in countries like Malaysia, zakat institutions have been set up to collect and distribute funds. From time to time there are a number of issues and challenges have been surrounding the zakat institutions. One of the issues is surplus of millions of ringgits of zakat funds that are yet to be distributed to the recipients. Besides the zakat fund, as amil, the zakat institutions such as LZNK also manage their own (Amil) fund. Evidence suggests that more than 60% of LZNK own equity fund (known as Management and Administration Group Fund) are kept in fixed-deposit accounts. Given this substantial amount of funds, a productive investment of the fund that could generate higher, consistent, yet safe return may be able to contribute to LZNK financial sustainability in the long run. However, an investment model that could assist zakat institutions such as LZNK to manage these funds in a more productive manner is yet to be developed. Therefore, this study aims to develop an investment model that can be employed by LZNK in particular and other zakat institutions in general in managing both types’ funds in a more productive manner. To achieve this goal, a mixed method approach was employed in the study. A qualitative approach is used where data is collected via face- to-face interviews with LZNK representatives as well as experts in relevant fields. In gathering data, a number of documents and items were also reviewed by the researchers. In addition, a survey method was also employed in the study by using a questionnaire instrument that was distributed to all zakat institutions in Malaysia. Interview data was analysed by employing a manual coding while data from document review was analysed using thematic analysis. Meanwhile, the data obtained via survey method was analysed descriptively. The key findings of the study, first, evidence suggests that LZNK has ventured into the minimal risks socially investment in managing both funds that is ultimately based on the short-term investments. Second, the study found Lembaga Zakat Negeri Kedah indicates the management and administration of the zakat surplus fund for both Kumpulan Wang Zakat and LZNK Amil’s allotment. Meanwhile, it is observed that findings from the survey are coherent with the experts’ viewpoint pertaining to the zakat surplus investment, Islamic financial investments elements and governance strategies for delivering upholding socially sustainable zakat investment. In addition, the study has identified the appropriate investment ecosystem and developed the investment model that may suit with the zakat institutions such as LZNK. Finally, a number of new investment alternatives, for example an investment account (Commodity Murabahah), are proposed by the study.