Capital Disclosure Practices among Zakat Institutions in Malaysia

Abstract

Zakat, a compulsory tax on every eligible Muslim, is one of the Islamic social finance mechanisms with a potential to alleviate poverty and inequality. In Malaysia, the collection and distribution systems of zakat are the responsibility of zakat institutions which are under the state’s jurisdiction. As an institution that is responsible for managing public capitals, inevitably, it is exposed to public assessment of transparency and accountability. Thus, the institutions need to be sufficiently transparent in disclosure of information. Good reporting practices should cover both financial and non-financial information for all capitals involved in operations, such as zakat, human, structural, social and environmental capital. The main purpose of this study is to assess the current financial and non-financial capital reporting practices of fourteen zakat institutions in Malaysia. All publicly available information and documents such as annual reports and newsletter were retrieved from the respective websites, and a content analysis was performed. The analysis reveals that the disclosures of non-financial capital information are still lacking among them, and most of the non-financial capital indicators are not yet reported. It is suggested that these institutions should adopt an integrated zakat reporting approach to improve the extent of information reported to the stakeholders. The new practice which is in line with the global move toward integrated reporting, will uplift the image of zakat institutions and assist them to gain increased public trust, recognition and consequently financial support. Besides, it is now timely for all zakat institution in Malaysia to fully use the websites as the medium of communication with stakeholders.