Efficiency of zakat institutions: Evidence from an emerging economy

Abstract

Efficiency is essential for an institution because it can measure how well resources are used to achieve its specific goals (Wahab & Rahman, 2011). Zakat institutions must be managed efficiently, so they are maximized in promoting socio-economic goals, especially poverty alleviation (Wahab & Rahman, 2013). This study aims to analyze the efficiency level of Baitul Mal districts/cities of Aceh Province in Indonesia. Efficiency measurement uses a nonparametric data envelopment analysis (DEA) approach during 2018–2020. DEA analyzes the interaction between input variables consisting of socialization costs, number of amil, and operational costs, with output variables comprising the total collection and distribution of zakat, infaq, and sadaqah (ZIS). The results show that 11 Baitul Mal out of 69 decision-making unit (DMU) (15.94%) are efficient overall, technical, and scale. As for technical efficiency, there are 16 Baitul Mal (23.19%) that are efficient, the remaining 26 Baitul Mal (40.58%) have a score below 60, and 27 Baitul Mal (36.23%) have a score above 60. Regency Baitul Mal Aceh Besar became the only Baitul Mal that achieved efficiency throughout the research period. The source of Baitul Mal’s inefficiency comes from all variables. Baitul Mal must optimize socialization costs by 60.68%, operational costs by 33.60%, and the role of amil by 3.20%. Furthermore, Baitul Mal must increase the amount of ZIS collection by 46.29% and the distribution of ZIS by 52.84% to achieve efficiency.