ASSESSING THE CONTRIBUTION OF ZAKAH FUND IN THE MALAYSIAN ECONOMY

Budiman, Mochammad Arif and Kusuma, Dimas Bagus and Ayuniyyah, Qurroh (2011) ASSESSING THE CONTRIBUTION OF ZAKAH FUND IN THE MALAYSIAN ECONOMY. In: International Zakat Conference, 19-21 July 2011, Bogor, Indonesia.

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Abstract

Background – Zakat is considered as one of strategic pillars in Islam. Significant improvements in Malaysia’s zakat administration started when PPZ -Pusat Pungutan Zakat (Zakat Collection Centre)- was establish in 1991. Afterwards, the collection and disbursement of zakat fund have shown a positive trend over the years and have played a certain role for socioeconomic betterment of the country. Problem – Since the contribution of zakat to economic growth has received attention recently and been debatable, the present paper will deliberately focus on the impact of zakat in spurring economic growth in Malaysia. Such that, there are three possible enquiries as entry point to obviously explore above mentioned topic, namely (1) what is the contribution of the zakat fund towards promoting economic growth in Malaysia? (2) What is nature of the relationship between zakat fund and economic growth in Malaysia? (3) What are the relationships between zakat fund and Malaysian economic growth in the short and long-run? Design/methodology/approach – The present paper used time series approach to trace out the behavior of selected variables during the period 1991-2009. Vector Auto Regression approach was utilized to elucidate on what variables which is endogeneity significant for capturing movements each variable observed. Variance decomposition, impulse response function, and Granger causality also were incorporated to empirically describe time series behavior. Findings – The paper found some evidences, as follows. (1) Zakat implementation in Malaysia is not yet used to advocate zakat as the major fiscal policy instrument and stabilize macroeconomic fluctuations. (2) Empirically, zakat could be significantly effect to the economy if the government is able to raise the economic growth. As Granger causality results perform the evidence that there is bi-rectional relationship between LnGDP and LnCOL, LNDIS. In other words, the zakat collection and disbursement would be increasing as economy expanding, (3) The contribution of LnCOL and LnDIS towards economic growth just give 19%, and 11% respectively as their amount are yet relied upon heavily on income of zakat payers which are dependent on the phase of business cycle in the economy.

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