Procedia Economics and Finance. Volume 31, 2015, Pages 551–562
International Accounting and Business Conference 2015, IABC 2015

 

DO CAPITAL ASSISTANCE PROGRAMS BY ZAKAT INSTITUTIONS HELP THE POOR?

Nubani Md Hassana, Abd Halim Mohd Noor

Abstract  

Zakat refers to the determined share of wealth in Islam to be distributed mainly to the poor and needy. The portions they received will enable them to fulfill their basic needs and conduct economic activities. One of the distribution instruments of zakat institutions is in form of loan-free capital assistance. The objective of capital assistance programs is to increase the income of the recipients through entrepreneurships. Zakat institutions have also initiated various programs such as offering training as well as giving business and marketing guidance, so that the recipients would become self-reliant and own a formal business. Based on content analysis on secondary data as well as primary data, the discussion of this paper is divided into three sections. First, this paper identifies the capital assistance program which is the most effective in increasing the income of the recipients. Second, this paper investigates the factors that contribute to the success of the program and third, it investigates the challenges encountered by zakat institution in capital assistance program. The study was done with the cooperation from Selangor Zakat Board, one of the main zakat institutions in Malaysia. The findings of the research revealed that the mobile business program is the most effective program in transforming the recipients into entrepreneurs where the success of the business can be seen in as early as 3 months. The findings of this research also revealed that instead of requesting the recipients to repay the capital aid, forced savings method has been imposed which became one of the factors that contribute to the success of the program.