Islamic Financial Institutions’ Preferences for Paying Zakat Through Zakat Institutions

Islamic Financial Institutions (IFIs) are companies that applying syariah rules on their activities. So, the likelihood of IFIs to pay zakat is high. Unfortunately, the realization of IFIs’ zakat payment is below its potential amount. This research aims to identify the preferences of IFIs for paying zakat through zakat institutions. This study used a quantitative approach that applied the Likert scale to the questionnaire. Six variables and 20 indicators were created to identify the IFIs’ preferences for paying zakat through zakat institutions. The findings indicated that IFIs preferred electronic mail as zakat institutions’ promotional media. In terms of payment channels, using a virtual account was preferable. However, IFIs preferred face-to-face consultation to a virtual one. Surprisingly, IFIs did not consider zakat deduction as the highest benefit of paying zakat. This study convinced that government zakat institution was preferable to distribute IFIs’ zakat funds. Lastly, IFIs expected zakat institutions to publish an audited financial report based on national accounting standards. This study suggests that zakat institutions implement digital technology in their fund collection strategy, yet offer a conventional method for consultation services. Generating audited financial reports based on national accounting standards is crucial for zakat institutions.