Determinants of the adoption of good governance : evidences from zakat institutions in Padang, Indonesia

Abstract

Zakat is one of the fundamental principles in Islam and central to develop an economic system by enhancing socio-economic development. It is an obligation for Muslims to give a specific amount of wealth to the beneficiaries of Zakat with the wide-ranging purposes of alleviating poverty. In Padang, Indonesia, many Zakat institutions are trusted bodies and are responsible for managing Zakat funds. The importance of proper management and governance are challenges for these institutions. Governance is defined as a decision-making process and how well institutions implement decisions. Good governance is critical to Zakat institutions for implementing good management practices that efficiently collect and distribute Zakat funds. This study examined the determinants of the adoption of good governance practices in Zakat institutions in Padang, Indonesia. A total of 51 questionnaires were analyzed out of 135 that had been distributed. The data was analyzed using the Statistical Package for The Social Science (SPSS) for descriptive statistics and the hypothesis testing. Four variables were used the determinants for the adoption of good governance, namely, number of employees, size, age and efficiency. Of the six hypotheses generated, only two hypotheses were significant. The results showed that only size of Zakat institutions were related positively and significantly to the adoption of good governance principles in Padang, Indonesia. The age of the Zakat institution also had a positive, significant relationship with performance. The study also found that the level of adoption of good governance practices in Zakat institutions in Padang was quite low. Overall, the study highlighted the urgency for the relevant authorities such as Badan Amil Zakat Nasional (BAZNAS) and local and national government to initiate governance improvements of Zakat institutions to ensure achievement of socio-economic justice.