As one of the developing countries, Indonesia encounters various economic problems, one of which is poverty. Of 270.20 million populations in Indonesia in 2020, 9.69% of them are living below the poverty line. Various efforts have been made by the government to reduce poverty, but they have not been able to solve the problem properly.

Over the period from 2000 to 2015, Indonesia experienced strong economic growth. However, only 20% of the population could enjoy the benefits of economic growth. In other words, 205 million Indonesians are still left behind and the distribution of income has been unequal [1].

Responding to these problems, Islam provides the solution through zakat (Islamic tax). Zakat is considered to be able to prosper the community sustainably [2]. According to Wahab [3], zakat is a significant source of state revenue. This can happen if the Muslim community performs the obligation to pay zakat and is balanced with the high productivity of zakat institutions (Baitul Mal) to collect zakat from the rich and distribute it to the poor. But in reality, the amount of zakat collection is still very far from its potential in the last decades. In 2020, the zakat institution in Indonesia only collected 3.5% of zakat compared to its potentiality of IDR240 trillion. It seems that zakat is still a pillar of Islam that is not fully paid attention to by Muslims in Indonesia.

A study conducted by the National Zakat Institution of Indonesia (BAZNAS) found that the existing zakat growth has not been matched by the efficiency and productivity of the institution's performance. This is due to the uneven performance of zakat institutions, the lack of structuring the zakat system and institutions, the lack of synergy and cooperation between zakat institutions and the lack of studies and researches on national zakat management. The inability of zakat institutions to collect zakat occurred in all provinces in Indonesia, including the Baitul Mal in the province of Aceh.

The total realization of zakat by Baitul Mal in the province of Aceh is still very far from the existing potential. In 2018, the amount of zakat collected was only IDR156 billion, while the zakat potential reached IDR3.1 trillion. This shows that there is still a huge opportunity for zakat institutions in Aceh province to increase their zakat collection.

The institution that was given authority to collect, write, calculate and manage zakat in Aceh province is called Baitul Mal, which was established in 1973. Baitul Mal is a privileged institution for the Aceh government and district/city governments that are independent and have the authority to maintain, manage and develop zakat, infaq, waqf property and other religious assets as well as the supervision of Islamic law guardianship. In the province of Aceh, Indonesia, there are 24 Baitul Mal. These Baitul Mal include one Baitul Mal at the provincial level and 23 Baitul Mal at the districts/cities level. The 23 Baitul Mal at the districts/cities include Baitul Mal of Banda Aceh, Aceh Utara, Aceh Besar, Aceh Barat, Aceh Tengah, Aceh Timur, Bener Meriah, Nagan Raya, Bireuen, Sabang, Pidie Jaya, Langsa, Pidie, Lhokseumawe, Aceh Tenggara, Aceh Selatan, Barat Daya, Simeulue, Gayo Lues, Subulussalam, Aceh Singkil, Aceh Tamiang and Aceh Jaya.

In managing zakat, Baitul Mal implements a good management system to support more effective performance. One indicator is the productivity of the institution. According to Law No. 23 of 2011 of the Republic of Indonesia concerning Zakat Management, Article 3 points A and B, the purpose of zakat management is to increase the effectiveness and efficiency of zakat services and management. This is in line with the thoughts of one of the Islamic scholars, namely Sheikh Yusuf Qardhawi, who stated that institutional productivity is very necessary because there is often waste in the use of operational costs that should be maximized in the planned program [4].

Previous studies on zakat management have focused mainly on the fields of theory [5,6], law and compliance [7], accounting issue [8,9] and Muslim motivation and awareness to pay zakat [10,11]. Several other studies have focused on the efficiency of Islamic banks [12,13], Islamic mutual funds [14-16], Islamic insurance [17,18], co-operatives [19,20] and zakat fund management by looking at the distribution and utilization of zakat funds [21] and productivity of zakat institutions using a qualitative descriptive approach. Wahab and Rahman [3] and Rusdiana [22], have explored zakat efficiency in Malaysia and Indonesia, respectively. Although various studies have been conducted on the productivity and efficiency of zakat institutions and other public sectors, however, none of them has comprehensively examined the productivity of zakat institutions, especially the Baitul Mal across 23 districts/cities in Aceh province, Indonesia.

Motivated to fill up the existing gaps in the previous studies, this study intends to assess the productivity trend of 24 Baitul Mal across districts/cities in Aceh province, Indonesia using the Malmquist Index. The findings of the study are hoped to shed some light for policy-makers in designing policy to further improve zakat management in the province. The findings of the study are also hoped to enrich existing empirical evidence of zakat productivity.

The rest of the study is structured in the following manner. Section 2 reviews the selected previous studies on zakat productivity. Section 3 discussed the research method and followed by the discussion of the findings in Section 4. Finally, Section 5 concludes the study. 

Review of Selected Previous Studies

Many previous studies have explored the productivity of banking and non-banking financial institutions [23-25] and several levels of productivity in non-financial institutions such as universities and other non-profit institutions. Previous studies on productivity at zakat institutions have been relatively scarce. For example, Wahab and Rahman [3], assessed the productivity of zakat institutions in Malaysia and found that productivity of zakat institutions for the period 2003 to 2007 increased by an average of 2.4% per year, with technical changes growth of 3.5% and efficiency change of 0.1%. The findings showed that the zakat institution should improve the technical efficiency aspect rather than increase the scale of cost efficiency with the utilization of existing inputs in the zakat institution being able to increase output by 19.4%.

Tayar and Achouri [26] examined the efficiency of zakat institutions in financing development in the Setif area in Algeria. They found that the zakat funds in the Setif region must improve their shortcomings to increase the amount of zakat collected and increase public trust in these funds. The study further suggested to investors and zakat fund institutions to be more efficient in alleviating poverty and unemployment as well as achieve sustainable economic development. Djaghballou et al. [27] analyzed the efficiency and productivity of zakat funds managed by the Directorates of Religious Affairs and Endowments (DRAE) in Algeria. They documented that the total factor productivity has increased sharply for all zakat funds. The zakat funds rely on technical aspects to get good efficiency.

Studies on the efficiency and productivity of zakat in Indonesia have been carried out by several researchers. For example, Al-Parisi [28] analyzed efficiency and productivity and their determinants of five Indonesian Zakat Institutions, namely DD, BAZNAS, PKPU, YBM BRI and Rumah Zakat Indonesia over the period from 2005 to 2014. DD is found to be the lowest relative efficiency level in the year 2010 at 9.63%. In addition, about 80% of the zakat institutions experienced an increase in productivity. In general, the main factor causing the inefficiency of the zakat institution was the inoptimality of zakat distribution to its recipients. This causes the failure of zakat to solve the problem of poverty. With details, distribution zakat funds need to be increased to 47.87%, revenue funds should increase to 31.53%, zakat socialization costs need to be reduced to 11.81% and operational costs to 8.79%. Furthermore, Anwar [29] explored the level of efficiency of the Zakat Management Agency (LPZ) in managing the potential of zakat in Indonesia. The results showed that the average efficiency of the LAZ Rumah Zakat was close to perfect efficiency, namely 94.58% and the two LPZ, namely LAZ Al-Azhar 84.02% and BAZNAS 88.21% were at sufficient efficiency, followed by the LAZ Rumah Yatim Arrohman with an average efficiency value of 64.63%, while the LAZ Al-Falah Social Fund Foundation is at the lowest efficiency with an average efficiency value of 38.25%. These findings showed that zakat institutions in Indonesia have not been able to optimally manage zakat to the highest efficiency level by combining a proper mix of inputs to produce the maximum number of outputs. Finally, in her study, Wahyuni [30] found that Rumah Zakat has recorded the highest level of efficiency, while the other zakat institutions recorded a low level of efficiency. These zakat institutions include Dompet Dhuafa institution, Baznas, Lazis NU and PKPU.

This research assesses the total productivity trend of zakat management institutions in Aceh Province Indonesia. The study measures the total productivity of one Baitul Mal at the provincial level and 23 Baitul Mal at the districts/cities level across the province during the 2014-2018 period. The secondary data used in the study were gathered from the Baitul Mal Directory in 2015-2018 and collected from the respective Baitul Mal. The Total Malmquist Productivity Factor Index (TFPMI) is used to measure productivity changes. To measure productivity level, the study utilizes the following inputs and outputs, as illustrated in Table 1.

Measurement of productivity using the Malmquist index method consists of the input variables of Baitul Mal operational costs and personnel costs or salaries of Amil. Meanwhile, the output variables include the total collection of zakat and the total distribution of zakat. Mathematically, the Malmquist Index model used to measure the Total Factor Productivity (TFP) of Baitul Mal in managing zakat is as follows:

where, d(x,y) represents the input distance function. The ratio in the first parenthesis indicates the change in technical efficiency (Effch) between periods t and t+1, the ratio in the second bracket is technical change (Techch) and efficiency change (Effch) This concept looks at Baitul Mal's ability to get maximum results (output) from a set of inputs. 

Then the change in technical efficiency can be further decomposed into pure technical efficiency change (Pech) and scale efficiency change (Sech). Pure technical efficiency measures management's ability to maximize output. Meanwhile, the efficiency scale reflects whether a Decision Unit (DMU) operates with optimal size. It can be indicated by >, < or = 1 based on whether the Baitul Mal is increasing, stagnant (no change), or decreasing. The TFP value is the product of the Effch and Techch indices whose value can also be greater than, equal to, less than 1 (one).

Table 1: Input-Output Specification

In this study, the Malmquist Productivity Index is used to measure the level of Baitul Mal’s productivity in Aceh province, Indonesia over the 2014-2018 period. Table 2 reports the average annual productivity level of Baitul Mal in the province of Aceh.

Table 2 shows the changes in TFP of Baitul Mal in Aceh Province during the period 2015 to 2018. On average, the year 2018 is recorded to be the highest TFP growth (26.6%) period by Baitul Mal in managing zakat. Furthermore, the change in efficiency (Effch) and change in technology (Techch) of Baitul Mal were 3.7% and 22.1%, respectively. The lowest Baitul Mal's TFP was recorded in the year 2017 (-15.8%), contributed mainly by Techch of 25.6%.

When viewed from the average value, the productivity level of Baitul Mal in Aceh province still tends to fluctuate. Nevertheless, the annual average of Baitul Mal’s productivity level in Aceh province is quite good (TFPch > 1), which was 1,064. In other words, the Baitul Mal’s productivity level in Aceh province showed an increase of 6.4%. The increase in Baitul Mal's TFP from 2015 to 2018 was largely due to changes in technology (10.1%), while efficiency contributed negatively (-3.5%). Meanwhile, the change in efficiency was mostly contributed by the pure technical efficiency (Pech) of 0.5% than the efficiency scale (Sech) which decreased by -4.0%.

During the research period, Baitul Mal's total factor productivity (TFPch) in general always increased. However, in 2017, TFP experienced a decline followed by a decrease in technological change. Based on these results, the changes in TFP of Baitul Mal are influenced by all inputs used, namely operational costs and personnel costs. This proves that the Baitul Mal institution in Aceh province needs to follow the development of existing technology. Along with the current era of the industrial revolution 4.0 as a revolutionary change and occurs when information technology is applied to all industries, so it needs to be responded to by all stakeholders, both from the public and private sectors to academics and the general public, especially the Baitul Mal institution which became an institution that is trusted to handle public assets.

In harmony with technological developments in the 4.0 industrial revolution era, one of the programs that Baitul Mal needs to implement is the zakat digitization program. The use of technology in zakat management is very relevant to improve the performance of zakat management. Digital zakat management has benefits and conveniences that are more effective and efficient and digitalization is expected to increase zakat collection.

Baitul Mal in Aceh province has also developed a technology system that allows the management and distribution of zakat to be more optimal, one of which is the collaboration between Baitul Mal and provincial banking institution, namely Bank Aceh Syariah, aiming at collecting and managing zakat digitally through the zakat feature in the application of e-banking. This zakat feature is expected to increase zakat collection in Aceh province.

Table 2: The Average Level of Productivity Baitul Mal in Aceh Province, 2015-2018

Source: Primary and secondary data processed using the DEAP 2.1 software (2021)

Total Productivity at 24 Baitul Mal in ACEH Province

Table 3 reports the TFP changes of 24 Baitul Mal in the province of Aceh, Indonesia during the 2015-2018 period based on the Malmquist Index values calculated using the DEAP 2.1 software. As illustrated in Table 3, the average productivity level of 24 Baitul Mal in Aceh province from 2015 to 2018 was found that Baitul Mal in the 15 districts/cities experienced a decrease in efficiency (Effch), one Baitul Mal in the district/city experienced no change in the efficiency, while the rest eight Baitul Mal in the districts/cities experienced an increase in the efficiency. The lowest efficiency change was recorded by Baitul Mal in Sabang (-26.1%), while the highest change was experienced by Baitul Mal in Lhokseumawe (20.1%).

Table 3 also shows that the highest Techch was recorded by Baitul Mal in Pidie (35.2%), while the lowest Techch was experienced by Baitul Mal in Aceh Besar, which experienced a decline of 7.4%. In terms of the value of pure efficiency change (Pech), Baitul Mal in eight districts/cities experienced a decrease in (Pech), Baitul Mal in seven districts/cities experienced no change in their Pech and Baitul Mal in nine cities/districts experienced an increase in their Pech. Finally, 15 Baitul Mal in the cities/district experienced an increase in their Sech, while the rest eight Baitul Mal in the cities/districts experienced a decline in their Sech. 

Overall, 17 Baitul Mal in the cities/districts experienced an increase in their TFPch, while the rest seven Baitul Mal across the cities/district recorded a decline in their TFPch. The highest value of TFPch was recorded by Baitul Mal in Bireuen which experienced an increase in TFPch of 33.3%, while the lowest value of the TFPch is recorded by Baitul Mal in Sabang (-19,9%). These findings showed that 17 Baitul Mal across the cities/districts have shown an improved productivity performance, while the rest seven Baitul Mal has experienced a deterioration in their TFP. 

The findings suggest that a continuous effort needs to be taken by the Baitul Mal management to further improve their productivity level. This could be done by properly use mixed inputs to produce optimal output. The adoption of e-zakat and digital zakat is one of the effective strategies for Baitul Mal to increase zakat collection and distribution in the future.

Table 3: Average Productivity Level of Baitul Mal in Aceh Province, 2014-2018

Source: Primary and secondary data processed using the DEAP 2.1 software (2021)

The estimation results of the Malmquist Productivity Index (MPI) showed that during the 2015-2018 period, the Baitul Mal's average annual productivity rate had increased by 6.4%. The highest annual average productivity occurred in 2018 and the lowest annual average productivity occurred in 2017. The increase in the Baitul Mal's average productivity level was largely due to changes in technology (Techch), while efficiency change (Effch) contributed negatively to the TFPch. The highest total productivity was recorded by Baitul Mal in Pidie Regency (35.2%), while the lowest total productivity was experienced by Baitul Mal in Aceh Besar Regency (-17.9%). These findings suggest that Baitul Mal should continuously improve their productivity level by adopting e-zakat and digital zakat management. 

This study only measures changes in total productivity and its decomposition. Future studies on the topic might explore the relative efficiency of Baitul Mal in managing zakat and find out their determinants. Further researchers might also expand the scope of the study by incorporating more zakat institutions from all provinces and districts/cities nationwide. Comparing the productivity of zakat institutions across the countries would also enrich the existing empirical evidence of zakat productivity.

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