Measuring Nonprofit Institution Performances: A Case of Islamic Social Finance

Abstract

Similar to commercial banks, zakat institutions collect Islamic social funds, e.g., zakat (Islamic alms), infaq, and shadaqah (charitable funds) from the public and distribute such funds to the specified beneficiaries with aims at no profit. However, in contrast to such traditional financial institutions that operate under a standardised regulatory framework, zakat institutions do not possess a universally recognised framework for evaluating their institutional performance. This study explores the recent practice of measuring the performance of zakat institutions using a qualitative literature review of 14 research reports published by Indonesia's National Zakat Agency (Baznas RI). NVivo is used for deductive coding, guided by three predefined themes, i.e., organizational performance, zakat distribution metrics, and zakat collection metrics. A further step is data visualization using quantitative data generated from the reviewed publication, for which a Python script is used for visualization. The findings reveal Baznas RI's approach to measuring zakat institutions' performance that is in line with the core business of zakat administration, e.g., development of financial ratios, Shariah (Islamic law) compliance indices, risk management frameworks, social impact assessments, among others. These applied frameworks integrate Islamic principles with operational performance indicators to address governance, transparency, and sustainability issues. This study contributes to the discourse on nonprofit institution research, particularly in relation to the institution-driven performance evaluation models for zakat institutions.