Impact of ZIS (Zakah, Infaq and Sadaqa) Distribution and Islamic Financial Institutions to MSMEs (Micro, Small, and Medium Enterprises) and Gross Regional Product Growth in East Java (2011-2014 Periods)

Abstract

Distribution and utilization are core activities of zakah management. It must be considered that Ameel zakah institutions’ success is not merely founded on their capability to collect zakah fund, but also their ability to distribute and utilize it.This research is aimed at understanding impact of ZIS (zakah, infaq and sadaqa) distribution and Islamic Financial Institutions role on distributing their funds in East Java to Micro, Small and Medium Enterprises (MSMEs) and Gross Regional Product (GRP) of East Java. This research is conducted by using secondary data from the quarterly report in 2011-2014 periods and also using quantitative approach through Partial Least Square (PLS) analysis method. The results of this study show that the distribution of ZIS funds has a significant negative effect on MSME growth and an insignificant positive effect on GDRP growth in East Java. The distribution of IFI funds has a significant positive effect on MSME growth and GDRP growth in East Java. The Growth in the number of IRB units has an insignificant positive effect on GRDP growth at the 5% T-table significance = 1.96. The dominant contribution of IFI on the GRDP should be maintained and Zakat Institutions have to improve performance in the ZIS funds management, so that it can contribute more maximally to the economy of East Java in the future. MSME should utilize the available funds of Zakat IFI to support their capital that will increase their productivity and output, thus increasing the GDRP of East Java.