Zakah compliance behavior among entrepreneurs: economic factors approach

• Date: 31 March 2020
• DOI: https://doi.org/10.1108/IJOES-09-2019-0145
• Pages: 285-302
• Published date: 31 March 2020
• Author: Saeed Awadh Bin-Nashwan,Hijattulah Abdul-Jabbar,Saliza Abdul Aziz,Alhassan Haladu
• Subject Matter: Economics,Social economics

Zakah compliance behavior

among entrepreneurs: economic

factors approach

Saeed Awadh Bin-Nashwan

Faculty of Administrative Sciences, Seiyun University, Seiyun, Yemen

Hijattulah Abdul-Jabbar and Saliza Abdul Aziz

Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia,

Sintok, Malaysia, and

Alhassan Haladu

Department of Accounting, Yusuf Maitama Sule University, Kano, Nigeria

Abstract

Purpose –As one of the constituted main pillars of Islam, Zakah compliance (ZC) is mandated upon

Muslims from all studies of life. Taking the disappointingly low compliance level in developing countries,

including Yemen, as its backdrop, the purpose of this study is to investigate ZC behavior among

entrepreneurs,drawing on the economic approach perspective.

Design/methodology/approach –The study adopted a cross-sectional design based on a survey of

entrepreneurs in Yemen. It used primary data collected via self-administered questionnaires, involving a

sample of 500 participants.A variance-based structural modeling equation-partialleast squares were used to

measure the instrumentsand assess the hypothesized relationships.

Findings –The findingsaffirmed the suitability of the economic factors approaches in the context of ZC in a

developing country. Specifically, the study demonstrated that Zakah law complexity has a significant

negative influenceon ZC of entrepreneurs. It also found a significant positiverelationship between religiosity

and ZC among the study sample, whereas the study revealed that law enforcement has no influence on

compliancebehavior.

Practical implications –Policies and programs focused on Zakah laws and regulations could be

formulatedto make them less complex and simpler for acceptablelevels of ZC. The result is further relevant to

policymakers in Muslim communities to strengthen the religious faith of Zakah payers towardcompliance

with one of the fundamentalreligious obligations such as Zakah.

Originality/value –This study enriches the limitedprevious studies on actual ZC from the perspective of

developing communities, especiallyYemen. Most importantly, the value was added to the limited literature

internationallyfrom an economic aspect.

Keywords Law, Compliance, Religiosity, Complexity, Business zakah, Economic approach

Paper type Research paper

1. Introduction

The pursuit of human well-being has garneredgrowing interest as a more holistic measure

of socio-economic progress in any community, as more emphasis tends to be given to

The authors gratefully acknowledge the support of the Nahd Developmental Foundation (NDF),

Yemen. NDF helps to develop the community by supporting education and research programs, as

well as philanthropy and development projects.

Zakah

compliance

behavior

285

Received4 September 2019

Revised3 October 2019

3November 2019

Accepted25 December 2019

InternationalJournal of Ethics and

Systems

Vol.36 No. 2, 2020

pp. 285-302

© Emerald Publishing Limited

2514-9369

DOI 10.1108/IJOES-09-2019-0145

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/2514-9369.htm

Islamic teachings as a way of life for everyindividual. The Islamic system is neither merely

a belief system nor religion in the usual sense, rather it is a complete way of life and a

comprehensive system that governs all aspects of followers’social existence individually

and collectively (Ahmad et al.,2017). It can be argued fervently that an ideological basis for

the Islamic system is bound by the well-being concept, which consists of relations within

humans in a society, the outreach of one society to another and the relationship between

humans and God (Joshanloo, 2017). Zakahcould serve as “the causal link”between spiritual

belief and economic well-being. The injunctionof Zakah is, therefore, designed in a way that

takes care of the welfare of all members in the community and creates a more prosperous

and peaceful culture (Majeed,2019).

Zakah is considered as a significant mechanism of wealth redistribution and social

service provision. It orders well-to-dopeople to share 2.5 per cent of their productive wealth

and dispenses it among the less privileged with lower income in society. Drawing on

historical evidence, through a sincere adherence and effective implementation of the noble

Zakah system, poverty was almostcompletely wiped out, and thus, achieved socio-economic

and spiritual advancement and wider well-being of all those under his rule (Nazri et al.,

2012). Recently, some scholars are of the view that Zakah can considerably contribute to

achieving sustained social security and economic prosperity by developing

entrepreneurship through mobilizing the Zakah funds in a deliberate way, and thus, boost

the gross domestic product (GDP) of the nation (Hoque et al.,2015). It has been argued that

the Zakah system if properly monitored and coordinated, could globally generate some US

$600bn every year (Heikal, 2014). However, the renewed advocacy for a vibrant functional

system of Zakah has been raised at such a criticaltime, especially the frustrations caused by

the prevalence of the perennial problem of poverty and its damning magnitudes

(Hoque et al.,2015). Admittedly, almost half of global poverty resides in Muslim countries,

nothing well that the Muslim population constitutes some 24 per cent of the total world

population (Pew Research Center, 2017).According to Hoque et al. (2015), Muslim countries

only add up 8 per cent to the global GDP, while unfortunately only a paltry sum of GDP (0.8

per cent) was devoted to research and development.

Although relentless attempts and efforts have been made by governments to

effectively provide a minimum standard of well-being for society, not much has been

attained (Bin-Nashwan et al., 2019). This fact indeed is quite baffling for so many reasons.

For instance, Communities have been bestowed with a functioning economic system such

as Zakah (in a form of worship) that has numerous profound and social benefits. This can

be translated when the haves (high income, rich) spend some of their wealth on the have-

nots (low income, poor). Zakah can support social programs that generate features of

social solidarity and financial inclusion to have an egalitarian and prosperous society,

where the well-being of all is given the topmost priority (Al-Qardawi, 2000).

Economically, Zakah also occupies a central place in a country’sfiscal policy and

operations. This has an impact on the underlying economic aggregates containing all the

known functions of the public economy of a modern state; which encompasses curtail

excessive income disparities, efficient allocation of resources, stabilization and growth,

stimulate economic activitiesand eradicate unemployment in the nation. As a matter of fact,

Zakah has the capacity to provide a stability element to public revenues to be particularly

valuable in maintaining budget stability given its fixed-rate and specified expenditure

(Daud and Audu, 2011). The beauty of Zakahphilosophy is that its impact is not limited only

to low-income nations but can also be an automatic stabilizer of Islamic financial potency

that provides a permanent mechanism for economic development toward high-income

communities. Through the Zakah fund distribution to low-income groups, it is possible to

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