Group 7 : Maharani Palkhan (1810603028)

Laila Juniar (1830603201)

Productive Zakat of Baznas Yogyakarta on the Growth of

Micro Business
A. Introduction

Poverty is a big danger to humanity (Utami, 2014). One of the government's

efforts to reduce the amount of poverty in Indonesia is to give authority to each
region to manage the potential for zakat, infaq and alms (ZIS). This role has been
managed by the government through the BAZ (Amil Zakat Agency) or private
institution known as LAZ (Amil Zakat Institution). According to the IDB (Islamic
Development Bank), in 2010 estimated the proportion of zakat in the Gross
Domestic Product of each country, calculated that the potential for zakat in the
world around up to $ 600 billion. However, the act of collecting zakat will be a
minimum practice, because the fundraising zakat is directly distributed to its
beneficiaries. In addition, zakat funds are distributed in short and immediate needs.

As the third pillar of Islam, zakat is believed to reduce social problems, such
as alleviating poverty and reducing income inequality (Wulansari, 2014). Many
Muslim economists argue that the Islamic economic system is built on two
important elements namely the loss of usury and the actualization of the potential
for zakat (Hafidhuddin, 2007). Various forms of distribution of zakat are currently
still dominated by the consumption of zakat. The benefits of zakat can only be felt
in a short time when zakat is received. Therefore, the distribution of zakat in the
form of consumption must be reconsidered and replaced by productive zakat
(Utami, 2014).

The productive distribution of zakat in the form of business capital is

expected to support the growth of the micro business community. The
development of micro businesses with capital derived from zakat absorbs labor
(Sartika, 2008: 77). Absorption of labor will reduce unemployment, it can be an
indicator of increased economic development. UU no. 23, 2011 concerning zakat
management article 25 explains that zakat must be distributed to mustahiq in
accordance with Islamic values. In addition, section 26 explains the distribution of
zakat based on priority scale by considering the principles of justice, justice and
obligations. Furthermore, section 27 explains that zakat can be utilized for
productive efforts in order to empower the poor and improve the quality of society.

Yogyakarta Baznas branch has been considered as amil, which has continued
to operate for less than 11 years to distribute the productive zakat. Since 2013 until
two years later, the number of productive earners must have reached around 200
members spread throughout the Yogyakarta regency. The distribution of zakat
made by Baznas Yogyakarta has implemented a model called BQB (Baitul Qiradh
Baznas), it is a kind of productive distribution of zakat by providing capital
assistance to mustahiq in accordance with business management. The aim of this
empirical study is to examine whether the productive ZIS variable is able to
influence the growth of micro business, employment and welfare.

B. Laying of Zakat, Infaq and Sadaqah

Zakat, infaq and sadaqah (ZIS) in Islamic economics can be interpreted as an

act of transfer of income (transfer of wealth) from the rich (agniya / own) to the
class of have-no. While productive ZIS and social funds are given to Mustahiq not
only for financial expenditure but also are developed and used for working capital,
hopefully they spend it to meet needs continuously (Asnaini, 2008: 64; Othman
and Noor, 2017). Provision of productive zakat is expected to stop the cycle of
poverty, increase the level of welfare and generate positive added value.
Qardhawi's concept of poverty alleviation arises from his concern for the reality of
Muslim civilization which is always wrapped in poverty throughout his life. All
facilities, offered by Qardhawi, can be translated into six ways to reduce poverty;
including work, collateral relatives, charity, guarantees of Baitul Maal, obligations
outside charity, voluntary charity and individual generosity (Qardhawi, 1995: 51).

One of the arguments that used to be the basis for the production of zakat is
the hadith narrated by Muslims that when the prophet Muhammad gave zakat
from money to Umar bin Al-Khattab who acted as amil, while he said, "Take it
very much, then have it (to be useful) and give it to other people and what comes
to you from this treasure while you don't need it and you don't ask, then take it.
And whatever is not so do not obey your wishes "(Hadith narrated by Muslims).
Ibn Qodamah's perspective as quoted by Qardhawi (1997: 69-70) highlights, "The
real purpose of zakat is to provide sufficient alms for the poor." This was also
quoted by Zuhdi who expressed the opinion of ash-Shafi'i, an-Nawawi, Ahmad
bin Hanbal and al-Qasim bin Salam, arguing that the poor must be given sufficient
funds from zakat, by doing so he ran away from poverty and to meet the needs of
himself and his family independently (Zuhdi, 1997: 246)

According to the regulation of the Minister of Religion No. 52, 2014, article
32 explains that zakat can be used for productive business in handling the poor
and improving the quality of society. The types of zakat utilization activities have
been divided into two things, including:

a) empowerment-based social development

b) economic development based on empowerment. Furthermore, productive
empowerment in economic development is divided into two types,
including:
c) traditional and productive and
d) creative productive. Distributing traditional productive zakat is usually
given in the form of productive items such as goats, cows, razors and so
on.

Giving zakat in this form will be able to create businesses that create jobs for
the community. While the creative productive distribution of zakat is manifested in
the form of capital both to build social projects and to increase micro business
capital (Mufraini, 2006: 88).

It is clearly justified that economic growth has become an economic

development that causes the goods and products of society, and then accompanied
by an increase in the welfare of its people (Naf 'an, 2014: 235).
 Adam Smith (1776) says that the theory of national development is based on:

a) natural law;
b) division of labor;
c) the process of capital accumulation and growth.

John Stuart Mill (1848) states that economic development is influenced by the
economic rate of capital, the level of profit, stationary conditions, and the role of
government. In addition, Schumpeter (1939) believes that economic development
is mainly created by the initiative of a group of innovative entrepreneurs, who
organize community groups to produce the goods needed. They are community
groups that create innovations or inventions in the economic field (Adisasmita,
2013).

The term economic development in Islam is the process of reducing poverty

and creating calm, comfort and ethics in life. In this case, economic development
according to the Islamic multidimensional model can involve quantitative and
qualitative aspects. The goal is not only the material aspects of the world, but also
the welfare of the outside. Mannan (1997) considers that the concept of Islamic
development has advantages compared to the concept of modern development.
The advantage lies in the motivation of Islamic economic development, not only
arising from economic problems but also from the divine goals listed in the Qur'an
and Hadith. On the other hand, micro business growth caused by capital
accumulation through productive ZIS will be one of the characteristics of the
growth and development of Islamic economics. Not only is it aimed at sustainable
micro business growth, it will also affect the growth of production factors (cf.
Muller, 2017). In turn, the growth of these factors of production can be a positive
signal of increased economic growth. Finally, it can contribute to the welfare of
society, especially mustahiq who have received business capital through
productive ZIS.

C. Research Design
 This design is exploratory research aimed at combining several theories into
one model (cf. Abd Wahab, Zainol, Abu Bakar, 2017). This type of research is
field research, while data are collected from distributing questionnaires and
conducting interviews with productive ZIS recipients given by Baznas
Yogyakarta. Meanwhile, secondary data was produced from various institutions,
namely: Bank Indonesia, Baznas Yogyakarta, relevant documents and linking
literature with research topics. The population of this study are all Yogyakarta
Baznas mustahiq who have received productive ZIS business capital. The
sampling method used is to consider the strength and influence of statistical
measures taking 50 samples from 200 mustahik. Data analysis tools and
hypothesis testing are performed using Structural Equation Modeling Partial Least
Square (PLS SEM) involved with SmartPLS Software 3.0. The SEM-PLS model
is believed to be able to test the research model simultaneously and be able to
analyze variables that cannot be measured directly and calculate errors.

D. Distributing the Productive ZIS.

One of the main objectives of Zakat is to distribute wealth among people so

that there is a balance between those who have more funds and those who lack
funds. Welfare will be realized if economic empowerment is managed
professionally and sustainably. Malthus in his book, the principles of political
economy explain the concept of development, where capital accumulation is one
of the most important factors for economic development. Malthus said,
"Increasing stable and sustainable prosperity is not possible without additional
capital on an ongoing basis (Jhingan, 2007: 98).

Distribution Patterns of the National Amil Zakat Agency (Baznas) of the

Republic of Indonesia:

a) Zakat, donation, alms and other religious social funds collected by

BAZNAS are distributed to those who are entitled to receive (mustahik)
 according to the provisions of Islamic law. As in At-Taubah 60, zakat
distribution is for 8 (eight) asnaf. The distribution of community funds
managed by BAZNAS is distributed in the form of distribution (curative
and emergency) and utilization (productive).
b) Distribution, namely the distribution of Zakat, Infaq, Alms (ZIS) and Other
Religious Social Funds (DSKL) from BAZNAS which are charitable or
emergency, covering four (4) fields: education; health; humanity; and
propaganda-advocacy.
c) Utilization, namely the distribution of Zakat, Infaq, Alms (ZIS) and Other
Religious Social Funds (DSKL) from BAZNAS which are productive in
nature covering three (3) fields: economy, education, and health.
d) BAZNAS has its own ZIS and DSKL funds in accordance with their
respective functions, namely in the fields of economics, education, health,
humanity as well as da'wah and advocacy.
e) In the field of Economics, BAZNAS implements Zakat, Infaq, Alms (ZIS)
and Other Religious Social Funds (DSKL) programs in the economic
sector comprehensively covering mustahik business capital programs,
creative economics, empowerment of farming businesses, revitalization of
rural markets, and empowerment of inland fisheries businesses and the sea,
and various models of handling and empowerment to improve the welfare
of mustahik.
f) Education Sector BAZNAS carries out a distribution program which
includes the distribution and utilization of ZIS and DSKL in the field of
education to mustahik comprehensively in order to improve the quality of
life of Indonesian people.
g) Health Sector BAZNAS carries out a distribution program that covers the
distribution and utilization of ZIS and DSKL in the health sector including
preventive, promotive, curative, rehabilitative and advocative health in
order to improve the degree of mustahik health.
h) The Humanitarian Affairs carries out services to mustahik which are urgent
both due to accident, disaster, education, health and abuse.
 i) The Da'wah and Advocacy Sector BAZNAS carries out a program of
distributing ZIS and DSKL in the field of da'wah in a comprehensive
manner in order to realize community life in accordance with Islamic
values, economic justice, alignments for weak communities, and increase
the dignity of the nation and the people.

The productive distribution of zakat in the form of business capital is one of

the programs carried out by Baznas Yogyakarta. It has been operating from 2013
to 2015 reaching a total of around 200 mustahiq recipients in all districts of
Yogyakarta. The distribution of zakat that has been held by Yogyakarta Baznas is
a model called BQB (Baitul Qiradh Baznas), which is a form of productive zakat
distribution by providing business capital to recipients in accordance with the
business being managed. The amount of business capital provided is an average of
3.6 million for each recipient each year. In this case, the recipient who receives
zakat is given the authority to manage these funds according to their business
needs.

However, in addition to providing business capital, Baznas Yogyakarta also

urges recipients to set aside a portion of their business by saving their money, in
connection with the requirements for a refund to Baznas that must be done within
ten months. After the recovery process is complete, the mustahiq money has been
accommodated by Baznas as savings which is then donated back to mustahiq.
Every year, Baznas Yogyakarta in collaboration with Desperindagkop initially
provides business assistance through the PLUT (integrated business services
center) program. The purpose of PLUT is to provide socialization and training to
improve the quality of recipients in managing their business.

E. Finding the ZIS Impact

Earning ZIS has a positive and significant effect on the growth of micro
businesses. The more productive ZIS is distributed, the faster the growth of the
micro business. Haneef (2002) revealed that zakat as an instrument of
redistribution aims to prevent wealth from being concentrated in the hands of
several communities. Therefore, the system of collecting and distributing zakat is
an effort to redistribute assets and wealth so that economic growth in this country
can really be utilized by all levels of society; because one of the goals of zakat is
to minimize economic inequality in society (Susanto, 2002: 96). Distributing
productive zakat means opening up an opportunity to create a business
independently. The ability of the community to create jobs independently will
strengthen the economic joints. People who are initially economically weak, will
gradually strengthen through economic empowerment. And we know that SMEs
are a sector that has an important role in economic development (Partono: 2002)

The variable micro business growth has a positive and significant effect on
employment. This shows that if there is an increase in micro business growth,
employment will increase. Schumpeter's macro-economic theory explains the
meaning of development, "An entrepreneur is the center of economic
development" (Jhingan, 2007). The increase in the number of micro business
growth has an impact on the availability of employment which makes it able to
absorb labor. Therefore, the development of micro businesses with capital from
zakat will absorb labor (Sartika, 2008: 77). Micro businesses can absorb a low-
educated workforce and live in small businesses, such as the domestic industry
(Faiz: 2002). In addition, their work will reduce unemployment, so that it can be
used as an indicator in increasing economic development.

Micro business growth variable also has a positive and significant effect on
welfare mustahiq. it means that if there is growth in mustahiq business, welfare
will increase. This result is consistent with Malthus's theory of the principles of
political economy. He clarified the role of production and distribution, bearing in
mind that production and distribution are "two main elements of well-being". If
the two are combined in the right proportion, he will be able to improve the
welfare of the country in a short time (Jhingan, 2007: 98). Likewise, in the
perspective of Islamic economics, Mahrusy explained that the continued growth of
the factors of production can really contribute to the welfare of society. Increased
factors of production are not considered economic growth if the production of
goods such as for example is proven to have a negative and harmful effect on
humans (Mahrusy, 2009). This view is similar to the concept of economic
development in Islamic terms, explained that economic development is defined as
the process of alleviating poverty and providing convenience, comfort and
politeness in life (Mahrusy, 2009).

Age variable does not affect welfare mustahiq. This is based on the p-value
count, which is 0.526 (> 0.05) and the path coefficient is -0.056. This shows no
matter how old a person is, it can affect the productivity he has made. The most
mustahiq work hard despite his age. Much needed requires them to be adequate
and always work hard.

Final hypothesis testing shows that productive ZIS directly has a positive and
significant effect on the welfare of mustahiq. This is based on the calculation of p-
value vaues and path coefficients, there are 0,000 (> 0.05) p values and path
coefficients of 0.458. The results of statistical tests are similar to Yusuf
Qardhawi's (1995) view of zakat. He revealed that zakat is one of the media to
reduce poverty. According to him, zakat has an important position in realizing
prosperity and freeing them from poverty. According to Malaysian Islamic
economist, Aslam Haneef, in the perspective of macroeconomic sharia, the
concept of income and wealth distribution can be seen from three aspects; first,
pre-production distribution; second, post-production distribution and third,
economic redistribution. Then the third component is divided into three
instruments, positive instruments (zakat), voluntary instruments (infaq, sadaqah
and waqf) and prohibited instruments (interest and speculation). Therefore,
encouraging the development of zakat, infaq and sadaqah is basically an effort to
redistribute assets and wealth so that economic growth in this country can really
be utilized at all levels of society (Susanto, 2002: 96; Bhuiyan, Siwar, Ismail,
Omar , 2017).

From interviews with respondents, most importantly when asked about the
Baznas ZIS distribution system, they revealed that the productive ZIS distribution
was quite good; in doing so it fosters the spirit of mustahiq to manage business
seriously. In addition, the ZIS system is productive by returning it within the first
10 months, enforcing mustahiq to seriously manage the business. As a result,
Baznas Yogyakarta also provides training to Mustahiq to improve their soft skills
in managing business.

The impact of zakat management has been empowered by Yogyakarta Baznas

to increase the mustahiq business. they can make their business independently,
such as the T-shirt printing industry, the lumpia home industry, tofu production
and others. This business has grown and continues to absorb the work of their
families and neighbors. Material welfare can be seen from the ability to meet daily
needs including basic needs, education, and health. While spiritual well-being can
be seen from mustahiq's ability to meet religious, mental and psychological needs.
However, most mustahiq still work in the agency and do others (interview with
respondents in October 2016).

F. Conclusion

In general, productive ZIS distributed to mustahiq has a significant influence

on the growth of micro business, employment and welfare mustahiq. Most micro
businesses that have been managed by Mustahiq have experienced significant
growth. It was realized from their work in business management. Micro businesses
that are managed in addition to generating sufficient turnover were also able to
meet the needs of the mustahiq both materially and spiritually. Age does not have
a significant effect on welfare. This shows that whatever age mustahiq. Through
the survey, most mustahiq still have to work hard to meet their needs.

It might be recommended that because productive zakat has a significant

effect on micro business growth, employment, and mustahiq welfare, Baznas
Yogyakarta should pay more attention to the management of productive zakat
distribution including monitoring and supervision. Yogyakarta Baznas must
consider the condition of mustahiq before distributing productive zakat in a
comprehensive manner, so that the distribution of zakat will not misuse personal
profit, but it is right on target. For further research, it is expected to conduct more
comprehensive research related to productive ZIS, especially in the use of
variables and modeling and data analysis, so that the data processed is more real to
describe the results of the study.