ASSESSMENT OF ZAKĀT: A CASE STUDY OF SELECTED ISLAMIC BANKS IN MALAYSIA

Zakāt is an obligatory payment imposed upon all types of business including Islamic banking institutions. This paper examines zakāt (alms due) assessment practices in Islamic banking institutions in Malaysia. Prior studies have mainly examined the payment trend of zakāt on businesses and the contrib...

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Bibliographic Details
Published in:International Journal of Economics, Management and Accounting Management and Accounting, 2020-07, Vol.28 (2), p.431-456
Main Authors: Ali, Nor Aini, Sarif, Suhaili, Balwi, Mohd Abd Wahab Fatoni Mohd, Kamri, Nor 'Azzah
Format: Article
Language:English
Subjects:
Banking industry
Banks
Councils
Economic development
Fixed assets
Islamic financing
Medical aid
Muslims
Pilgrimages
Poverty
Puberty
Religion
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Summary:Zakāt is an obligatory payment imposed upon all types of business including Islamic banking institutions. This paper examines zakāt (alms due) assessment practices in Islamic banking institutions in Malaysia. Prior studies have mainly examined the payment trend of zakāt on businesses and the contributing factors of payment. This study was conducted in two zakāt paying Islamic banks; a local full-fledged Islamic bank and an Islamic subsidiary of a conventional bank. Primary and secondary data were collected. Interviews were conducted with relevant respondents from both banks to obtain hands-on information about zakāt assessment in Islamic banking institutions. The results reveal that the banks are committed to paying zakāt. Assessment of the zakāt due is jointly handled by the Finance and Shariah Departments. The whole process of zakāt treatment from policies, assessment, and distribution involve all levels in the bank hierarchical structure. As there is no single mandatory zakāt treatment regulation or standard, each bank has its own approach that led to variances in balance sheet item recognition and ultimately the amount of zakāt payable. While the variances are minor for one bank, they become considerably significant for the entire Islamic banking sector in Malaysia. Apart from enriching the Islamic finance literature especially in Islamic banking zakāt practices, this study will also provide valuable insight for practitioners and the relevant authorities.
ISSN:2462-1420