Behavioral Dimensions of Zakat Contribution by Individuals: A Survey

The purpose of this survey is to gain a basic understanding of what governs the behavior of zakat payers and then map the same with what the environment offers to them in terms of products, practices, policies, regulations and what-have-you. It would also be interesting to study how the
factors may differ for alternative forms of charity and across different regions. The survey was open at SurveyMonkey.Com during November 08-15, 2014. The online survey that elicited 156 response was enhanced by a manual survey administered in the international campus of the Islamic Sciences University of Malaysia eliciting 68 responses. In aggregate there were 224 responses from nationals of 28 countries with sizable numbers from Malaysia, Nigeria, India and Pakistan.

The purpose of this study is to gain a fundamental understanding of what governs the behavior of zakat-donors – the triggers and motivators, traits and attributes, preferences, inclinations as well as aversions and discomforts – and then map the same with what the environment offers. Based on their responses to a set of statements, that connote a specific motivator, trait and preference, an attempt has been made to develop psychographic profiles of individual Islamic donors or groups among them. Various statements used in the study capture the following factors.

“Servitude to God” is expected to be the dominant motivator for a believing and practicing Muslim for whom zakat is compulsorily mandated by the Creator. It is a religious obligation that opens the possibility of earning His pleasure through helping His creation. “Purification and expiation” is also expected to be key motivators. Zakat is paid by the believers and faithfuls as a way to purify wealth; to expiate one’s sins. The study also considers “feel good” as well as “getting rid of feeling of guilt” as possible motivators. Since zakat is primarily targeted at alleviating poverty and helping the needy including the near-and-dear-ones, “altruism”, “benevolence and concern for others”, “affinity and relationship” are also expected to motivate zakat payment. Additional motivators considered in the study are “self-actualization” through “making a difference to the society” and/or “helping a cause that is dear to one’s heart”, such as, “propagation of Islam”.

It may be noted here that some of the factors above may be inter-related, because every action for a believing and practicing Muslim is, in the ultimate analysis, undertaken with a view to seeking the pleasure of the Almighty and is motivated by “servitude to the Creator”. The factors however, connote specific concerns and are therefore, considered independently as influencers and motivators. Other factors may be in the nature of more mundane considerations, such as, immediate returns in the form of “tax benefits” and “self-recognition”. Zakat may be paid simply for “compliance with dictates of the state” or to bring “social change through local and voluntary organizations”.

The study also aims to examine the relationship if any, between the various motivators, influencers, preferences of Islamic donors and their own individual traits – piety, benevolence, vigilance, accountability, responsibility, ability to trust, penchant for details, apathy, indolence, indifference – as well as the characteristics of zakat organizations, e.g. governance, transparency, accountability, information-sharing, frugality, extravagence etc.

In addition to measuring the relative importance of factors that motivate the individual zakat payer, the study also seeks to profile the Islamic donors in terms of specific behavioral traits and preferences. The study has the additional objective of examining whether the above-mentioned factors are influenced by the country of origin of the zakat-payer.

Another important objective of the study is to examine if and to what extent specific motivators, behavioral traits and preferences are inter-related and go together. For instance, it may seek answers to the following types of questions. Do the individuals who pay zakat to seek the pleasure of God are also motivated by altrusim, affinity or kinship? Do they show responsibility, and accountability? Do they appreciate frugality and caution? Do they demand a lot of information? Do they prefer the state or non-state actors to be entrusted with zakat management?

Findings

First we consider the relative importance attached to various motivators, triggers and preferences. A simple calculation of the “relative” frequency of responses to a given statement throws up some interesting findings as below. We also consider three specific subsets from Nigeria, India and Malaysia and examine if “country of origin” is a significant influencer of their behavior.

The primary motivator for zakat-payer is “Servitude to God” (see table 1) as the related statements elicit maximum responses.

Related to the above is the purification and expiation aspect of zakat. Islamic donors are motivated by positive statements without use of terms, such as, “sin” or “guilt”. As high as 64 percent pay zakat because it “purifies” their wealth. The precentage comes down to  36 percent when the statement is rephrased as “wipes off sins”. Similarly, a high 51 percent say they pay zakat because “it feels good” while only 30 percent say, they pay zakat because “it helps get rid of his/her feeling of guilt”.

“Benevolence and concern for the poor and the needy” motivates 63 percent of respondents and 44 percent pay zakat to an organization because it can help the poor and make a difference to the society. Further, their “affinity” with potential beneficiaries motivates 33 percent of the Islamic donors. Altruism and affinity seem to be of relatively lesser significance in Nigeria as compared to India and Malaysia

“Self-actualization” is not a major motivator as a meagre 27 percent say they pay zakat to an organization because it helps a cause dear to his/her heart. This percentage is unusually low at 5 percent for Nigeria, 30 percent for India and 40 percent for Malaysia.

A higher percentage, 36 percent of all respondents pay zakat because it may be utlized for “propagation of Islam.” This percentage is 24 percent, 33 percent and 58 percent for Nigeria, India and Malaysia respectively.

“Self-recognition” is a motivator for a little more than one-third of respondents. 37 percent of them feel that zakat organizations must acknowledge his/her contribution through a letter or a note or some other form of recognition. This ratio is 19 percent, 64 percent and 31 percent respectively for Nigeria, India and Malaysia.

Zakat payers may not be motivated significantly by immediate returns in the form of “tax benefits”. It is a motivator for a mere 17 percent of the respondents and elicits almost zero response in Nigeria and India. It is however, a significant motivator in a country like Malaysia. The overall picture may be biased due to absence of substantial tax benefit on zakat in a given jurisdiction. While Malaysia provides for tax rebate or a reduction in tax payable by the full amount of zakat, other countries provide tax benefit similar to other donations equal to a reduction in tax base or taxable earnings by the zakat amount. This is supported by the fact that 46 percent of Islamic donors feel if an individual pays zakat, he/she should get full deduction in income tax payable. The ratio is quite high in India at 55 percent and in Nigeria at a more modest 29 percent. A relatively lower percentage is reported for partial deduction in tax payable. A relatively lower percentage is also reported for tax benefit to businesses. However, an equally high 46 percent feel that zakat and taxes should not be mixed up; neither individual nor business should get any tax reduction for paying zakat. It is as high as 79 percent in India and extremely low at 17 percent in Malaysia; arguably for reasons cited above.

“Compliance with dictates of the state” does not appear to be a significant motivator as only 12 percent acknowledge they pay zakat because it is compulsorily required by the state, even when the sample includes countries like Malaysia, Saudi Arabia, Pakistan that have mandated zakat to be compulsory. Predictably the ratio is higher at 33 percent in Malaysia, but does not explain the low overall ratio. The ratio, predictably is zero for India, consistent with the fact that state plays no role in zakat management) and a meagre 7 percent in Nigeria (compulsory in a few provinces). Does this imply that Islamic donors are not in favor of the state having a role in zakat management? Quite contrarily, 40-41 percent of respondents feel that the central government should collect and distribute zakat. Similarly, 34 percent feel that the provincial government should collect zakat and a higher percent (40 percent) feel that it should distribute zakat as well. A country-wise analysis however offers quite intersting contrasts.  India and Malaysia seem to be placed at opposite extremes with Nigeria placed in between. Few Indian Islamic donors see any role for the state at the central or provincial levels, a large majority batting for non-government organizations and some opting for the ulema. An exactly opposite set of preferences are reported for Islamic donors from Malaysia. Preferences from Nigeria are similar to India, albeit less intense.

Overall, a sizable percentage of Islamic donors perhaps look forward to “social change through local and voluntary initiatives” if we bracket local entities with NGOs and ulema together.

Islamic donors display a high sense of responsibilty/ accountability in the matter of zakat estimation and payments with 67 percent asserting that they have a fair knowledge of how to estimate their zakat liability. 27 percent would need professional advice and assistance. A high 46 percent felt it is their reponsibilty and religious obligation to ensure that zakat is utilized properly for the benefit of the poor and asnaf. A meagre 14 percent displayed extreme apathy, indolence and indifference saying they are unconcerned about how zakat is utilized once the obligation to pay is over. Is there a pattern here too in country-specific responses?

Indian Islamic donors demonstrate a high sense of responsibility and accountability. Feeling that they are adequately knowledgeable, they hold themselves personally responsible and accountable for the end-use of zakat. Nigerian respondents also demonstrate fair level of knowledgeable but a far lesser degree of personal accountability for the end-use of zakat. Malaysian Islamic donors feel they need expert assistance and also demonstrate moderate levels of personal accountability. The felt need for expert advice may also demonstrate a “quest for accuracy and perfection”. However, the straightforward response that “I am not concerned about how zakat is utilized..”  among 27 percent of Malaysian Islamic donors compared to 10 percent and 9 percent of Islamic donors from India and Nigeria respectively does indicate “apathy” and “indifference” as being the reason for seeking expert assistance.

Islamic donors clearly feel that the zakat collecting organizations should heavily promote their campaigns to raise funds, similar to moden fundraising organizations, through roadshows, conferences etc. (42 percent) and use mainstream media – newspaper, tv, internet etc for advertising and fundraising campaigns (50 percent). An equally large number of respondents (48 percent) feel that they should avoid costly and expensive methods of creating awareness. Only a meagre 16 percent believe that they should use masjids alone for creating awareness regarding zakat. Indian zakat donors tend to be far more frugal than their Nigerian and Malaysian counterparts with 60 percent prefering a cautious approach and avoidance of promotional methods that cost money. Malaysian zakat donors (77 percent) seem to be quite comfortable with aggressive marketing and promotional campaigns to raise funds. Once again Indian zakat donors display distinct inclination for frugality, with only 21 percent in favor of promotion and some even opting for the traditional use of masjid for creating public awareness about zakat.

Islamic donors, overall, display a high degree of conservatism in the matter of utilization of zakat by organizations to cover their own administrative expenses with 39 percent entirely ruling this out and 48 percent opting for the standard practice of permitting zakat organizations to use up to one-eights of zakat collected to cover their own administrative expenses.[1] Since zakat flows are meant for the poor and the destitute, scholars recommend that zakat collected during a year should be fully spent during that year. 35-36 percent of Islamic donors seem to take en extreme position in this matter and prefer a prohibition on organizations from carrying undistributed surplus zakat to the next lunar year and/or investing such surplus to generate good long-term returns. Even when such surplus is invested in safe and liquid avenues for a short-term, 26 percent find the idea repugnant. While respondents from Malaysia bat for aggressive marketing and fund-raising campaigns, they also display at the same time a higher degree of concern. 52 percent feel that the entire cost should be absorbed by non-zakat funds and 57 percent prefer to place a cap at one-eighth of zakat funds collected. In the matter of carry forward of undistributed surplus they display more flexibility with only 30 percent rejecting this possibility. The corresponding percentage for India is 48 percent.

Individual zakat donors place a lot of value on “audit” with 58 percent opting for mandatory and independent financial audit and 65 percent for shariah audit. 40 percent seem to be avid seekers of information requiring that organizations must report the figure for total zakat collections every month to the public. They also seem to place high value on transparency in the form of separation of zakat, sadaqa, cash waqf funds and their disclosure to the public (48-49 percent). An equally large percent respondents require annual disclosure of categorywise as well as project-wise distribution of zakat to the public. The inter-country comparison clearly shows that there are major differences in the way Islamic donors demand good governance and seek transparency. Respondents from Nigeria are least concerned about audit and are least demanding in terms of relevant information. Zakat donors from Malaysia display maximum vigilance and concern for good governance.

While making inter-country comparison and interpreting the country-specific findings, it is useful to juxtapose the social, economic, legal, and political environment present in these countries. It may be noted that in Malaysia, zakat management is undertaken in a fairly organized manner with involvement of state and private corporate entities, with a legal-regulatory framework in place and with a policy environment that coordinates between financial institutions, religious councils, inland revenue authorities and other relevant institutions. In India on the other hand, zakat management takes place in a regulatory and policy vacuum and is undertaken informally with minimal involvement of any institutional and organizational infrastructure, the ulema playing a key role in creating public awareness, collecting and utilizing zakat funds. In such an environment, “trust” reposed in the ulema essentially replaces the need for timely sharing of information; with the ulema accountable only to God. Nigeria interestingly, is charaterized by a mix of formal and informal zakat management with involvement of the state entities, as well as non-state actors at local levels; a regulatory framework being in place in only a few provinces. The perceived significance of financial audit, Shariah audit, information-sharing and good governance practices may thus, be explained in terms of the impact of these environmental differences on the Islamic donors’s motivators, traits and preferences.

[1] The holy Quran ordains zakat to be distributed among eight categories of beneficiaries including zakat officials and collectors. This is interpreted as a one-eighth cap on the ratio of zakat that a zakat organization can use to absorb its operational costs.

The preliminary findings of this survey were presented at 1st International Conference on Islamic Behavioral Finance at Jeddah by the author.

Mohammed Obaidullah | January 14, 2015