The Role of Islamic Financial Institutions in Distributing Zakat Refund (Wakalah

Zakat on business is an obligation imposed on the individual business, partnership business, organizations, and companies, including Islamic Financial Institution (IFI). The institutions are envisioned to be vital in supporting zakat's socioeconomic aims in Malaysia. Furthermore, zakat institutions have been exposed to many challenges that hinder the efficiency of the institutions in administering the zakat distribution. Thus, the zakat authority established a new approach which is the wakalah contract, that would allow zakat payers to participate in the distribution process by being appointed as a legitimate zakat distributors or wakil. This research focuses on an Islamic Financial Institution (IFI), Bank Muamalat Malaysia Berhad (BMMB), as a distributor of zakat refund. Concerning that, this study aims to explain the concept of zakat refund and to explore the roles of BMMB as wakil in distributing zakat refund. The method used for this study is qualitative and comprises two types of data collection methods which are interview and library research. The finding shows that BMMB has utilized the zakat fund through the wakalah contract by organizing programs that benefited the asnaf.


The Role of Islamic Financial Institutions in
Distributing Zakat Refund (Wakalah)

Introduction
Zakat is one of Islam's five pillars.Zakat refers explicitly to growth and expansion.Zakat carries three distinct connotations, which are linguistic, religious, and legal.Zakat is a term that refers to the cleansing or purifying of anything from dirt or filth.Theologically, it refers to the religious cleansing that occurs because of zakat donation.If a person does not pay the right of Allah's servant from the prosperity granted upon that person, his money is unclean.Additionally, it refers to growth or expansion in two aspects: spiritual development via Allah's pleasure.According to Abd Wahab & Abdul Rahman (2011), Muslims are obliged to contribute a portion of their money based on specific circumstances and restrictions for specified recipients.Zakat's primary purpose is to uphold fairness in socioeconomic.In economics, zakat aims to influence several parameters, including aggregate consumption, savings and investment, aggregate labour and capital supply, poverty elimination, and economic growth.Paying zakat demonstrates concern for the least fortunate people of society (Harahap, 2018).Offering contributions to the poor and needy will contribute to economic growth by channelling capital to members of society with a far greater marginal propensity to consume.This conforms to the definition of zakat, which also indicates enlargement (Ab Rahman et al., 2012).
The obligation to pay zakat falls not only on Muslim people but also on corporations.Business is one of the most significant economic activities endorsed by the Prophet Muhammad SAW.For Islamic financial institutions, Islamic banks, for example, are viewed as a mechanism for adding value or increasing wealth.Islamic banks aim to promote Muslim economic prosperity by expanding financial markets, institutions, and instruments.In line with the above, one of the purposes of Islamic banks is the equal distribution of income and wealth, and Islamic banks are the appropriate instrument to fulfil those goals.These objectives can be met by the payment of zakat by these entities.As a result, zakat plays a vital part in the economic growth of the ummah.In Malaysia, Islamic banks are expected to pay zakat in accordance with Sharia.Business zakat accounting was developed primarily based on al-Qur'an, hadiths, Ijma' ulama and Qiyas.Thus, there is a range of business zakat accounting procedures employed by commercial companies.There are different evaluation methodologies for company zakat are essential to align with their individual businesses' peculiarities (Tajuddin et al., 2017).
Numerous challenges in zakat distribution could hinder the effectiveness of the distribution procedure.Among them is the inadequacy of unqualified staff in zakat institutions, which creates inefficient distribution, inadequate data records, a shortage of human resources, and geographical factors (Wahid et al., 2021).Considering the zakat distribution issue that constantly occurs, zakat institutions take the initiative to collaborate with financial institutions in boosting the zakat distribution through the wakalah contract.Therefore, a zakat refund can be defined as refunded zakat money by Islamic Religious Council to the institutions that pay zakat on business to the Islamic Religious Council.The zakat money will be refunded to individuals, government or private organizations, and business agencies.This research explores the roles of Bank Muamalat Malaysia Berhad as wakil in distributing zakat refund.

Literature Review
Based on the annual report of Majlis Agama Islam Wilayah Persekutuan, MAIWP (2019) explained that wakalah zakat distribution is the refund of zakat money to zakat payers to be distributed to asnaf by themselves.Abdulganiy (2020), stated that wakalah emphasise of four pillars such as sighah/aqad (offer and acceptance), al-muwakkil (principal), al-wakil (agent) and al-muwakkil fiih (matter of the contract).Through a wakalah contract, al-muwakkil (zakat institution), transfers responsibility (localisation/decentralisation) of zakat distribution to alwakil (representatives).According to Shaiffe & Hassan (2019) the zakat institution had established the mechanism for distribution of zakat money through the WAZA (Wakalah Zakat).The concept of WAZA can simplify that the zakat institution appointed a muzakki (individuals, companies, employers, and higher education institutions) to implement zakat distribution.WAZA is managed by the muzzaki, who applied wakalah contract to receive the watikah wakalah from the zakat institution.Through the WAZA mechanism, it can reduce the liability of zakat institutions towards asnaf through the involvement of various parties in helping to identify asnaf who are in the vicinity of their area.Wahid, Osmera, & Mohd Noor (2021) investigates the significance of the skills element in Malaysian wakalah contracts for zakat distribution to ensure the sustainability of continuous zakat distribution.The Pelaburan Hartanah Berhad (PHB) Company was interviewed using a semi-structured interview method for this study.The result indicated that PHB's wakalah has several positive effects, including a wider locality of distribution, a positive effect from the aspect of communal perception on zakat distribution, and a positive impact on the representatives of PHB itself.

Research Methodology
The researcher uses the interview method to acquire primary data for this study.Structured interviews are conducted by the researcher using verbally given questions, in which a list of predefined questions is asked to the respondent.The respondents comprise three BMMB staff in Social Finance Department.Library research was conducted to obtain data such as books, documents, and annual reports as references.The data will then be arranged according to the thematic analysis to ensure the content is presented wisely.

Analysis and Discussion
Zakat refund in BMMB BMMB has a network of 67 branches throughout the country.BMMB has its electronic channels, including i-Muamalat (the Bank's internet banking solution) and Self-Service Terminals (SST), which are available at 141 locations via the Bank's ATM, CDM, and CICO network.Additionally, BMMB also provides corporate internet banking.Moreover, BMMB is a subsidiary of the DRB-HICOM Berhad Group, which controls 70% of the Bank's shares, with Khazanah Nasional Berhad holding the other 30%.On 15th November 2017, BMMB was formally approved as a member of the Global Alliance for Banking on Values (GABV), the first Islamic bank in the world and Southeast Asia to be recognized as a member of GABV, indicating a rising market for values-based banking.BMMB is entrusted to distribute the zakat money to the eligible asnaf within one year from the date of the wakalah letter obtained based on the guidelines set by the respective Pusat Pungutan Zakat Negeri.Saufi (2022), also stated that zakat authority will only refund 37.5% or 3/8 of the zakat money to any company and organization including BMMB.This percentage obtained when the minimum zakat paid annually to the Pusat Pungutan Zakat Negeri between RM 10,000 and RM 999.999.99.If the company or organization paid zakat more than RM 1 million, the company or organization will obtain 50% of the total zakat pay to the zakat authority (Ariff, 2021).

Zakat Refund Distribution Practices in BMMB
According to Saufi (2022), it can be simplified that there are two BMMB entities involved in distributing the zakat refund, and the process shown in figure 1 BMMB Entity Function Social Finance Department BMMB • Secretariat to Zakat Committee in managing the zakat, infaq, and Maslahah'Ammah fund distribution and project implementation by BMMB.• Responsible for processing the applicant in the proposal form Zakat committee • Responsible for distributing the zakat refund.They are an internal committee in BMMB that manages the distribution of zakat refund.• The BMMB appoints Zakat Committee to manage the refunded zakat money mandated by the Pusat Pungutan Zakat Negeri.• The committee will analyze the applications received from the applicants • The requirement needed for the applications to be tabled to the Zakat Committee is that the applicants must be categorized in the eight categories of asnaf.The meeting held is to consider whether the applications (proposal) are rejected or approved based on the criteria and guidelines Figure 1

Process Flow Distribution of Zakat Refund Fund
According to Shuib (2022), there are nine steps in the process flow before the distribution of zakat refund fund.The first step is to receive the application.Social Finance Department will receive applications from the applicant that needs the contribution from the zakat refund money, and the applicants must be categorized in the eight categories of asnaf or Bank Muamalat branches or regional offices will receive the application and forward it to the Social Finance Department.The second step is processing the application.Social Finance will process the application according to the criteria and eligibilities and conduct an AMLA screening.The Anti Money Laundering name screening as per the Standard of Procedure (SOP) on AMLA requirements.The AML name screening is required to check whether the applicants are blacklisted, involved in money laundering, or otherwise.Then, the screening is to be verified and signed by the maker and checker, and the screening will be filed, documented, or saved.If the applicant meets the requirement, Social Finance Department will proceed to step three, and if it is otherwise, Social Finance Department will inform the applicant regarding the rejected application.The applicant will be notified of the rejection via phone or letter.The third step is to prepare a proposal paper to be forwarded to Zakat Committee for approval and submitted to the Head of Section for review.The approval can be via two ways which are meeting or approval via circulation (AVC).If the Head of Section recommends that the proposal be forwarded to Zakat Committee, proceed to step four.If otherwise, Social Finance Department will inform the applicant regarding the rejected application.Forth step is to submit the proposal to the Head of the Department for approval to be presented to Zakat Committee.If the Head of Department approves the proposal paper to be presented to Zakat Committee, proceed to step five, and if it is otherwise, return to step three.
The following fifth step is present the proposal to Zakat Committee for approval.If the Zakat Committee approves the proposal paper, proceed to step six.If otherwise, Social Finance Department will inform the applicant regarding the rejection.The sixth step is the payment process.Social Finance Department will forward relevantly documents or information with the approved applications list to the Finance Division for payment processing.The seventh step is completing the payment, where the Social Finance Department will receive a payment slip from the Finance Division as proof of the payment completed and proceed to step eight.If Social Finance Department did not receive the payment slip, return to step six, or follow up with Finance Division regarding the pending payment.The eighth step for the process flow is to notify the applicant, regional office, or branch.Social Finance Department will notify the applicant, regional office, or branch that payment has been credited.For the last step, Social Finance Department will request the regional office or branch to disburse the fund to the recipients.The process flow can be illustrated as follows application: According to Shuib (2022), Zakat Committee have a restriction in approving a contribution or projects.Although Zakat Committee has the authority to approve a contribution or projects, the approval amount is limited to only RM10,000.In BMMB, the management committee is a higher authority than the Zakat Committee.According to Shuib (2022), the distribution of zakat to the asnaf group is as stated in the Qur'an for eight categories who are eligible to receive the allocation of zakat money.This is based on the Qur'an in Surah al-Taubah verse 60, which emphasizes that zakat is only for fakir, miskin, amil (a person who manages the zakat), mu'allaf (a person who converts to Islam), slave (a person who wants freedom), al gharimin (a person who are in debt), fi sabilillah (a person who fights or engages in activities to defend, uphold, and endorse Islam and Islamic beliefs), and ibnu sabil (a wayfarer who endures depletion of cash while traveling from his or her home nation and whose adventure benefits and returns to Islam).Based on the guidelines (Garis Panduan dan Prosedur Pengagihan Zakat, Infaq, & Maslahah 'Ammah BMMB) for determining the eligibility of the applicant by BMMB, a person who is eligible to receive zakat money must be categorized in the eight categories of asnaf (BMMB, n.d.) .

Wakalah Zakat in BMMB zakat Refund
According to Shuib (2022), the zakat refund for the year 2020 was refunded from below zakat cent er to BMMB, as shown in the Every State of Islamic Religious Council has its own criteria and requirement set up in the wakalah contract, and he only provides examples of three different Pusat Pungutan Zakat Negeri, which are Pusat Urus Zakat Pulau Pinang, Majlis Agama Islam Wilayah Persekutuan, and Majlis Agama Islam Johor.First, Pusat Urus Zakat Pulau Pinang.According to their wakalah contract, the representative's BMMB must distribute zakat to at least 3/8 category of asnaf and priority to fakir, miskin, mu'allaf, and fi sabilillah.Next, BMMB is required to send a complete report or statement of zakat distribution to Pusat Urus Zakat Pulau Pinang.In addition, the distribution of zakat money is done within one year from the date of the wakalah letter.Second, Majlis Agama Islam Wilayah Persekutuan.Based on the wakalah contract, the recipients eligible to receive the zakat money are fakir, miskin, mu'allaf, ar-riqab, gharimin, fi sabilillah, and ibnu sabil.One of the requirements is similar to Pusat Urus Zakat Pulau Pinang, which is that the distribution of zakat money is done within one year from the date of the wakalah letter (BMMB, n.d.).However, there is additional requirement for the matter if the money cannot be distributed within one year, the company (BMMB) is required to return the money or apply for an extension of time by submitting a reason to Majlis Agama Islam Wilayah Persekutuan (MAIWP).The distribution of zakat refund for every state is restricted to their own state only.However, zakat refund money from Majlis Agama Islam Wilayah Persekutuan can be given to all states.Third, Majlis Agama Islam Johor.According to their wakalah contract, BMMB, who is the representative or wakil of Majlis Agama Islam Johor, must distribute the zakat money to the designated asnaf.Next, distribution in the form of a program must be maintained the name and logo of Majlis Agama Islam Johor together.For contribution in the form of a house by building a new house, the recipients who received the contribution must use the specified specifications such as size, colour, type of house, etc.Moreover, the contribution should be social in nature, such as contribution to asnaf or students.BMMB must send a report on the program's implementation within one year or before claiming zakat refund money in the following year (Shuib, 2022).Next, according to Wan Nuraihan Ab Shatar (2022), all Pusat Pungutan Zakat Negeri has a similar requirement which is that the distribution must be within one year from the date of the wakalah letter received by BMMB.The Bank had distributed all zakat refund within the stipulated haul, which shows that BMMB complies with the criteria or requirements set up by the Pusat Pungutan Zakat Negeri.

BMMB Zakat Refund Distribution Project
No Project Name Project explanation 1. Jariah Fund Online crowdfunding platform aims to ease contributors in donating their wealth to the underprivileged community.Jariah Fund also is a crowdfunding initiative for education, health, and economic empowerment projects.The involvement of Charity Partners is NGOs or associations that act as a ground team for Jariah Fund.The scope of Charity Partner in Jariah Fund includes a selection of beneficiaries and campaigns and post-implementation of the campaign.
To date, there are 16 campaigns featured in the Jariah Fund portal, and 12 of the campaigns are completed.When a campaign period has ended, but the collection did not achieve the targeted amount within the stipulated time, the balance is to be utilized by the zakat refund money to complete the campaign.The receiver of Jariah Fund's contribution comprises eight categories of asnaf and B40 under the asnaf category.
2. Back-to-School programme under Sekretariat Dakwah Korporat Jabatan Kemajuan Islam (SDK-JAKIM) JAKIM, thru its Sekretariat Dakwah Korporat (SDK), has invited BMMB to join the program, which involved 50 students who were severely affected by the flood and Covid-19.Each student will receive a donation of shirts, pants, school bags, and shoes worth RM 200 per person to ease their burden as most of their school uniforms were affected by the flood.The allocation is in accordance

i-Tekad Mawaddah
Financial assistance empowers the asnaf and B40 groups and prevents them from being trapped in indebtedness.Through i-Tekad Mawaddah, the Bank strategically enhances the targeted community's up-skilling and/or re-skilling via training and mentoring.Entrepreneurs will undergo a structured training program to enhance their business and financial management skills and obtain Malaysia Halal Certification.In this program, the bank will invest and act as rabbul mal in providing capital to i-Tekad Mawaddah entrepreneurs with a pre-agreed profit-shared ratio (PSR).The entrepreneurs will act as 'mudarib' to manage the fund based on the specific businesses or ventures that are only involved in the sector of food and beverages.4. Flood victim aid The zakat refund fund is utilized to purchase 86 units of cooking gas cylinders that will be distributed to the flood victims, comprised of 86 households.The justification for the flood victims to receive the contribution is based on the second project as they were considered as asnaf 'al-gharimin 5. BMMB staff impacted by fire A staff to lose her family house in a fire mishap at Tumpat, Kelantan.The fire destroyed the entire victim's house, but no injuries were reported.BMMB provided cash contribution to the fire victim utilizing the zakat refund money as emergency relief for the staff and her family.6. Contribution to orphans and orphanage homes Social Finance Department received eight applications from orphanage homes for Ramadhan's contribution.The contribution provided by BMMB to the orphanages comprises general donations and 'duit raya' contributions to the orphans.The contribution is utilizing the zakat refund money from Pusat Pungutan Zakat Majlis Agama Islam Wilayah Persekutuan (PPZ-MAIWP) as zakat refund from Kuala Lumpur is not restricted to their own state only.

Conclusion
In conclusion, the wakalah approach would allow zakat payers) to participate in the distribution process by being appointed as a legitimate zakat distributor or wakil.This method enables zakat funds to be dispersed more broadly and reach a greater number of asnaf.However, the beneficiary of the zakat return is responsible for successfully distributing the zakat refund to establish Muslims' faith in the zakat money they provide.BMMB successfully disbursed zakat refund to asnaf that were eligible for them, which opened up even more space for institutions to be closer to asnaf.More research can be done in the future concerning zakat refund, such as research into problems that occur in association with zakat refund, research concerning the auditing process of zakat refund, and research concerning the efficiency of zakat refund delivery by IFI.Therefore, this study is significant to become a benchmark for institutions that carry out trusts as wakil, especially Islamic banking institutions in performing their duties as wakil so that the implementation of zakat returns in banking institutions becomes more efficient and can be distributed to eligible asnaf.

Figure 2 :
Figure 2: Process Flow Distribution of Zakat Refund Fund Source: Interview with BMMB Staff