The Impact Of Macroeconomic Variables On Zakat Collection: The Case in Lembaga Zakat Selangor

Zakat is the third pillar in Islam which forms social security for the poor and needy. Zakat also develops a balanced economic growth through redistribution of wealth in society, wealth purification and for spiritual development. Zakat is among the most important elements of wealth management that are so dynamic and recognized as one of the proper methods to measure economic growth. Macroeconomic variables such as growth domestic product (GDP), consumer price index (CPI) and unemployment rate are among the best measures for the economic condition of a country. Thus, proper Zakat fund management should be carried out to address wealth accumulation during good economy and also zakat collection shortages during bad economy such as in the financial crisis. Consequently, the objective of this paper is to examine the relationship between zakat collection in Selangor and macroeconomic variables such as GDP, CPI and unemployment rate. Quarterly data is used to show seasonal fluctuations or changes in zakat collection in relation to changes in macroeconomic variables. This study applies time series analysis to assess the state of zakat collection under the influence of macroeconomic factors. The findings suggest growth domestic product (GDP) is positive and significantly correlated with Zakat collection (ZC) at 1% significant level. This means the higher the GDP the higher the amount of Zakat collection and vice versa. Consumer price index (CPI) and unemployment rate are not significantly correlated with Zakat collection (ZC). These results implicate the need for Lembaga Zakat Selangor particularly to have proper financial planning in zakat collection such as bigger savings during good economy (higher GDP) to cover the increasing demand from the existing and potential beneficiaries (Asnaf) during crisis period (lower GDP) such as Covid-19.