Islamic Banks and Their Zakat Distribution Practices

Abstract

Islamic banks in Malaysia have been actively paying, reporting, and distributing their own zakat, albeit a few are not doing so. These three types of information can be found in the banks’ published documents, which are the financial statements. However, the disclosure of information on zakat distribution is limited. Thus, this study’s objective is to determine how Islamic banks that pay zakat in Malaysia distribute their zakat. This study was conducted using semi-structured interviews where bank officers in charge of zakat funds were interviewed to gather their insights regarding how banks distribute zakat. The data collected were analysed using computer-assisted qualitative analysis software (CAQDAS) named ATLAS.ti. Then, codified data was generated in table form using the Thematic Analysis Matrix (TAM). This study found that insufficient information was disclosed in the financial statements and annual reports of Islamic banks, particularly on zakat distribution practices. Hence, this study suggests that the information in Islamic banks’ financial statements be further enriched with more extensive zakat disclosures.