Factors that Influence Business Zakat Compliance Among Small and Medium Entrepreneurs

Abstract

The purpose of this paper is to examine factors that influenced business zakat compliance among small and medium entrepreneurs. The factors are role of zakat administrator, business profitability, length of business establishment and entrepreneurs’ zakat attitude. The study adopts mixed methods approach. 47 Muslims owners of small and medium enterprises participated in the study. They completed a survey and explained their business zakat compliance experience through interviewers. The survey data were analyzed using the Mann-Whitney and logit regression analysis. Then, the interview data provided in-depth understanding about respondents’ zakat attitude and opinion on role of zakat administrator. The results show the majority (72.3 percent) of the respondents paid business zakat. The factors that influence zakat business compliance were the business owners’ zakat attitude and business profitability. The interview data supporeds the findings; respondents who paid zakat understood the responsibility and importance of business zakat payment. However, some of them regularly paid zakat directly to the poor and needy because they have doubts on zakat administrator’s credibility in distributing zakat to asnaf. On the other hand, respondents who did not pay zakat declared that did not know other types of zakat other than zakat fitr. This shows that the role of zakat administrator in promoting business zakat should be made more extensive. Zakat administrator also can introduce a scheme where zakat payers can personally distribute zakat to asnaf using the money they paid to zakat administrators. This could encourage entrepreneurs to pay zakat and increase the numbers of zakat payers.