An appraisal on the business success of

Journal of Financial Reporting and Accounting An appraisal on the business success of entrepreneurial asnaf: An empirical study on the state zakat organization (the Selangor Zakat Board or Lembaga Zakat Selangor) in Malaysia Amirul Afif Muhamat Norlida Jaafar Hardi Emrie Rosly Hasman Abdul Manan

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An appraisal on the business success of entrepreneurial asnaf An empirical study on the state zakat organization (the Selangor Zakat Board or Lembaga Zakat Selangor) in Malaysia

Success of entrepreneurial asnaf 51


Amirul Afif Muhamat and Norlida Jaafar Center of Finance, Economics, Insurance and Islamic Banking Studies, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia

Hardi Emrie Rosly MASMED, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia, and

Hasman Abdul Manan Center of Marketing, Retailing and Entrepreneurship, Universiti Teknologi MARA, Shah Alam, Selangor, Malaysia Abstract Purpose – The purpose of this paper is to evaluate and measure the business model of the state welfare organization in assisting and ensuring the business success of its entrepreneurs or zakat recipients. Design/methodology/approach – A survey was employed to obtain feedback from the recipients of zakat for small businesses under the scheme of entrepreneurial asnaf zakat. Findings – The respondents, in general, agree that the variables for the study – capital, courses or training and knowledge or know-how – are important to them in helping the zakat recipients to succeed in their businesses, which then translates into a better standard of living. Positive correlation is shown for the three variables in determining the success rate of the programme and regression analysis shows that only capital and an asnaf’s knowledge is significant in determining an asnaf’s entrepreneurial success, which leaves training as insignificant. Research limitations/implications – This paper explores the other side of zakat distribution, in the sense that many studies focus on the distribution of zakat collection from the zakat payers to the asnaf whereby the distinction of this study is that it evaluates the asnaf that want to transform their condition through the entrepreneurial asnaf programme. This is rarely investigated due to the lack of a similar programme in other places, even within Malaysia. The limitation for the study is in terms of solid support from the respective parties. This includes the management of Lembaga Zakat Selangor, due to the bureaucratic process, albeit understandable, to protect certain confidential information, and also unfavourable respondents’ attitude when being questioned, which is a normal phenomenon in survey study. Practical implications – This paper provides insights into the implementation of entrepreneurial zakat, which can be emulated by other zakat collection agencies to develop similar or better innovative programmes for the benefit of the community. Originality/value – This paper is unique since the feedback is given by the entrepreneurs who receive financial assistance from the state zakat organization in Malaysia, which means the information is derived from the original source. The findings provide good information for practitioners as well as for academicians and students. Keywords LZS, Asnaf, Usahawan asnaf, Zakat, Tithe, Malaysia, Entrepreneurs Paper type Research paper

Journal of Financial Reporting and Accounting Vol. 11 No. 1, 2013 pp. 51-63 q Emerald Group Publishing Limited 1985-2517 DOI 10.1108/JFRA-03-2013-0012

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1. Introduction The practice of zakat (Arabic: zaka¯t or zaka¯h) is one of the main tenets in Islam and it is compulsory for every Muslim to commit towards performing zakat. Linguistically, the word zakat refers to an act to cleanse or purify something that is dirty while, theologically, it refers to spiritually purifying one’s soul through the act of zakat. In legal terms, zakat is referred to as the act of giving away a portion of your wealth to certain groups of people under certain circumstances (Abdul Wahab and Abdul Rahim, 2011). Muslims generally take all three views in reference to zakat; that is, an act where one would give away part of his or her wealth to a certain segment of the population as a means to purify one’s wealth and soul. The rate of charge for zakat is generally 2.5 per cent on items that are qualified to be charged for zakat as mentioned in the Holy Quran (Al-Quran, 21:73; 17:26-29). However, the 2.5 per cent is not absolute as the rate could be different depending on the form of property being paid as zakat. It is also interesting to note that this religious commandment also exists in other religions than Islam, including Christianity and Judaism. For example, in the Bible[1] (Luke 18:12) concerning tithe “I fast twice a week and give a tenth of all I get.” The similarity is in term of transferring some amount of money from the rich to the needy, although it is important to note that in Islam, the objectives or maqasid encompasses a wider spectrum compared to others. However, unlike the practise of tithing, zakat collection is distributed to very specific groups of people called asnaf and may not be distributed to anyone else. Due to the complexity in collection and specific nature in the distribution of zakat, it is often found that there is a need for a specific body to properly manage its distribution and collection. Normally, such a task would fall upon the shoulders of the government of an Islamic state, as in the case of Malaysia, where the management of zakat has always been under the privy of the local state governments under the direct jurisdiction of the Sultan or the head of state. These state governments would then establish specialized bodies or zakat agencies to collect and manage zakat funds while also organizing events or activities to channel these funds to those who are in need. In channeling zakat funds, the state zakat authorities would organize various programmes targeted towards the various Shariah ordained zakat recipients – the asnaf. The Entrepreneurial Asnaf or Usahawan Asnaf programme is one such programme that is specifically intended to help the asnaf to be involved in business so that they will be able to extricate themselves from their current predicament and possibly become zakat contributors themselves. However, whenever a new programme with respect to zakat distribution is created, there is always question concerning whether the programme created is actually beneficial to the target recipient. Usually, any programme organized by a government backed organization is planned top-down and could possibly be formulated without actually knowing the needs and wants of the targeted group. As a result, these programmes may end up being elaborately designed but, unfortunately, provide no or little benefit to the asnaf at all. Therefore, it is imperative to get some feedback from the asnaf themselves concerning what is actually helpful to their success. Notwithstanding that past research has indicated that capital, knowledge and training does provide some measure of success, given a different contextual setting, such as the situation of the asnaf, the outcome may be different. The information gained from such feedback would be invaluable to Selangor Zakat Board and the zakat payers in general, in which they can see to a certain degree how efficiently and effectively the fund they contributed is used in fulfilling their Shariah obligations.


The zakat funds are limited and it is imperative to ensure that the most mileage (in terms of developing successful entrepreneurs) is gained from the utilization thereof. The most visible issue, among others, when it comes to starting up a business is capital, and the issue becomes more complicated when the potential entrepreneur does not have collateral that can be pledged to the bank for obtaining credit (Abd Rahman and Ahmad, 2011; Widiyanto and Ismail, 2010; Abdul Wahab and Abdul Rahim, 2011; Muhamat and Rosly, 2011; Kasim, 1990), lack of proper education (Robinson, 1994), no or little experience in business activities (Abd Rahman and Ahmad, 2011; Ibrahim, 2005 (cited in Abd Rahman and Ahmad (2011)); Muhamat and Rosly, 2010; Wickramansinghe and Sharma, 2005) and in terms of personality far from the image of a convincing entrepreneur (Abd Rahman and Ahmad, 2011; Rauch and Frese, 2007). These traits are all possessed by the asnaf who want to be involved in the asnaf entrepreneurial programme. As such, the only criterion that they can build up by themselves is motivation, which is their desire to become a successful entrepreneur and to transform their lives. One has to note that desire alone will not bring success albeit desire will be the last bastion when it comes to emotional distress. The study employs three variables to be examined – capital, training and knowledge – because these are the three main components that will be emphasised by the Lembaga Zakat Selangor (LZS) and any government agency (which is involved in nurturing new SME entrepreneurs) in order to equip the potential entrepreneur with the basic skills in business. One notes that these important factors are stressed when perusing the web sites of LZS and SME Corp[2]. Although Abd Rahman and Ahmad (2011) have evidenced that capital is not the sole factor that will influence the success of the entrepreneurial asnaf programme (which we agree to some extent) but we believe that these three variables; capital, knowledge and training are the main pillars to start and to sustain the business until it grows and matures. This is supported by the information from the LZS and SME Corp web sites. The element of improvement and innovation will only take place when the business proceeds to the later stage, which means other variables must be considered. In light of the above, it is the objective of this research is to study the factors that contribute to the success of the asnaf entrepreneurs’ programme from the point of view of the asnaf. Although we acknowledge that the factors that contribute towards the success of an entrepreneur are many, in the interest of making this research manageable, we only focus on the three main factors mentioned above and will leave the other factors to a later study. This study also makes special reference to the study done by Abd Rahman and Ahmad (2011), which was conducted in Bahasa Malaysia that touched on a similar topic and was independently done at about the same time as this study. It is the desire of the researchers to have this study complement Abd Rahman and Ahmad (2011) for the betterment of the overall zakat system. 2. Literature review The literature review will attempt to briefly introduce the Selangor Zakat Board, address the concept of zakat and the dependent variables that have an impact on the asnaf ’s opinions on what would enable them to be successful based on the findings of past researchers. 2.1 Selangor Zakat Board LZS or the Selangor Zakat Board is one of the leading zakat collection agencies in Malaysia and specifically serves the State of Selangor. It first began its operations in 1994 as an


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independent and privately owned company using the name MAIS Zakat Sendirian Berhad (MAIS Zakat Pte. Ltd), which was owned by Majlis Agama Islam Selangor or the Selangor State Islamic Council (MAIS). In 1996, MAIS Zakat was renamed as Pusat Zakat Selangor (Selangor Zakat Centre) and in the following year, it was given the mandate to collect all forms of zakat including zakat fitrah – a type of zakat that is obligatory to all Muslims and is specifically collected during the fasting month of Ramadhan – on top of its existing zakat collection functions. The centre recently upgraded its status from a privately owned company to an incorporated body under the Trustee (Incorporation) Act 1952, and was again renamed as LZS (Selangor Zakat Board). The elevation of status from a mere “centre” to a “board” reflects its broader functions, capability and trust given towards the institution in administering the process of zakat throughout the State of Selangor. The state zakat agencies have been continuously developing innovative programmes in order to raise the standard of living of its asnaf or the eight groups of people that qualify to be given zakat distribution. The main objective is to extricate the recipients from poverty so that one day they would be able to pay zakat by themselves. For example, one of the innovative programmes introduced by the Selangor Zakat Board is usahawan asnaf or entrepreneurial asnaf, a programme where zakat funds are distributed to the needy in the form of funding to assist business formation and training. Interestingly, Mohd Balwi and Abd Halim (2008) pointed out that the Selangor Zakat Board has sort of pioneered the entrepreneurial asnaf concept before it was followed by other Islamic state councils, such as Kuala Lumpur and Negeri Sembilan. Today, all state zakat management boards have, in some form or another, an entrepreneurial asnaf programme in place. In selecting the candidates for this programme, the Selangor Zakat Board claims to be following a stringent procedure in selecting the right individuals to participate. One is considered eligible when he or she has proven to have the capability, strong passion for business, and is also physically fit. Financial assistance will be dependent on the type of business and can be categorized into two: less than RM5k and more than RM5k to RM50k. In addition to financial assistance, those who are selected will be trained concerning the concepts of marketing, personal development and entrepreneurship (www.e-zakat.com. my) to ensure that they are also mentally prepared to indulge in entrepreneurship. The progress of these participants is also closely monitored by the staff of the Selangor Zakat Board (www.e-zakat.com.my/program-asnaf/ (accessed 17 May 2012)). 2.2 The concept of Zakat As mentioned earlier, zakat is one of the five tenets of Islam and is a cornerstone or a key aspect of the Muslim economy, as propagated by Metwally (1997), as cited in Kusuma and Sukmana (2010). In Islam, the accumulation of wealth is encouraged but under the premise that a part of such wealth should be shared with those who are in need. Ideally, the accumulation of wealth and the practise of zakat should eradicate one of the most perennial problems within any society – poverty (Adnan and Abu Bakar, 2009). Sharia states that funds collected from zakat can only be distributed to a particular group of people called asnaf. The Quran states that there are eight groups of people that fall under the asnaf. The first group of people are called fakir (the destitute) where an individual is known to have no means of income or wealth to support his or her self and family daily needs. Next, are the poor, individuals that have some form of income but whose income is unable to sufficiently support their basic needs, such as


clothing or food. The third group is the Amil, or those who are entrusted by the government to collect zakat on its behalf. The fourth group are the Muallaf – people who have just embraced Islam as a religion, while the fifth group are the Riqab or those who are trying to free themselves from the shackles of slavery. The sixth group are the Gharimin. These are the people who are in debt and need help in sustaining their basic needs. This is followed by the Ibnusabil or people who are travelling and are stranded at a particular place with no money to continue their travel. Finally, the money can also be used by those who are striving to work in the path of Islam (Fisabilillah). The quantum of how much a recipient should receive from zakat is not specifically mentioned. Traditionally, zakat is compulsory for every qualified Muslim and Muslim owned business. In recent years, the scope has broadened to include institutional payers like companies and corporations as well (Adnan and Abu Bakar, 2009). Zakat is calculated differently from income tax or corporate tax. Generally, from an accounting treatment point of view, the calculation of zakat is derived from the information on the balance sheet by looking at the position of an individual or company’s assets and liabilities, whereas, in a normal taxation scheme, tax is calculated based on items found in the income statements, such as net profit or income generated (Hamat, 2009). In other words, zakat focuses on one’s wealth whereas tax focuses on one’s income. 2.3 Capital Sourcing and obtaining a start-up business capital has always been one of the most challenging issues for potential entrepreneurs. This is mainly because many financial institutions are quite reluctant to deal with small enterprises due to their perception that loans given to this group of entrepreneur present a high risk of non-performing. Business start-up capital is the money required to initiate a new business venture. The provision of money is generally regarded as an initiative to micro-enterprises (SMEs) to start or to reinforce existing businesses and any early success achieved by these entrepreneurs would greatly improve the operational efficiency and effectiveness, and, subsequently, lead to improvement in the organization’s performance, hence, alleviating poverty among them (Widiyanto and Ismail, 2010). Widiyanto and Ismail (2010) further explained that capital is a succession of critical elements for any business to be successful, apart from labour expertise, technology and other inputs; the resulting growth in income, would, in turn, allow the poor to acquire the basic necessities in life, such as food, education and health. Abdul Wahab and Abdul Rahim (2011, p. 43) state that, “zakat or the transfer of ownership of specific property to specific individuals under specific conditions” is the sole funding for business creation and development for LZS, and is distributed to support entrepreneurial programmes through joint ventures between the board and with qualified asnafs (the poor, the needy and muallaf ) in the state. According to Ahmad and Ahmad (2009), there is a demand for Islamic financial products and services due to their overriding objective of social benefit maximization as opposed to profit maximization. To the poor, the capital provided by LZS is viewed as a motivational injection and opportunity for them to venture into business amid the restriction of securing loans from banks. 2.4 Knowledge Knowledge is a key feature for small and medium entrepreneurs that are competing in the global market, especially for new entrants (Omerzel and Antoncic, 2008). Jusoh et al. (2010) pointed out that it has played an important role in economic growth, while Omerzel


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and Antoncic (2008) denoted it as a basis for sustainable competitive advantage, and Burns et al. (2011) regarded it as a very important asset for entrepreneurs. Omerzel and Antoncic (2008) stated that knowledge is the defining factor to distinguish entrepreneurs from their competitors and that those with better knowledge would be more efficient and able to learn and grasp the changes in the market faster. Organizations that possess high knowledge quality would perform the job better and produce new and valuable products and services, reduce expenditure, enhance sales, increase analytical ability, elevate method efficiency and escalate performance (Yoo et al., 2011). The capability to build, transmit and administer knowledge form the core of product development and manufacturing processes that serve as a foundation for entrepreneurs to compete in the new market economy (Burns et al., 2011). Acquiring job-related proficiency and practical know-how through repeated work processes, which, subsequently, lead to efficiency enhancement of the firm, are vital elements to achieve profitability, whilst self-confidence and education are crucial for the development of the firm (Omerzel and Antoncic, 2008). Jusoh et al. (2010) explained that there are four mechanisms that constitute knowledge for firms – knowledge concerning organizational practices, knowledge concerning assortment of products, knowledge pertaining to the willingness of the markets and customers to pay for dissimilar merchandise characteristics and knowledge relating to R&D processes. Entrepreneurs require a specific method to obtain knowledge and they would normally learn from what they know best instead of something new or undiscovered, thus knowledge limitations and the belief in one’s problem-solving skills often denote a major barrier to success (Omerzel and Antoncic, 2008). 2.5 Training Training is an activity that changes people’s behaviour; with training and development, a company is able to utilize its human resources to accomplish the organization’s objectives as well the employees’ individual objectives (Ghosh et al., 2011). They then further mentioned that the aim of training is to inspire people to master the know-how, skills and behaviours that are highlighted in training modules and to apply them in their daily activities. Education and learning are essential in economic development; both are critical elements in averting the prospect of high levels of long-term unemployment and in preserving the absorptive ability of innovative organizations (De Faoite et al., 2003). Learning is a process to enhance one’s skills in performing a specific function (Ghosh et al., 2011), while Higgins and Elliot (2011) consider it as an influential element in opportunity identification that is closely related to entrepreneurial success. Sarri et al. (2010) mentioned that the dynamic development of learning would facilitate the enactment of entrepreneurial activities. Higgins and Elliot (2011) described learning as the varying abilities that entrepreneurs need to effectively retrieve the latest information and attribute meaning and context. The significance of education and training in respect of economic growth is well documented in the literature whereby training is now viewed as an important element in intellectual capital development; employees are no longer considered as an economical burden but as income generators to the company (De Faoite et al., 2003). Lourenco and Jayawarna (2011) added that creativity and imagination are essential in entrepreneurial development, which is exemplified by inadequate resources and high levels of ambiguity. Higgins and Elliot (2011) emphasized that small entrepreneurial companies are always referred to as the dynamic force of economic growth due to their diversity and flexibility, while Lourenco and Jayawarna (2011) added that fostering


enterprising skills through entrepreneurship education and formulating training courses with the purpose of nurturing the creative ability of nascent entrepreneurs, influences the intention to start-up businesses directly and indirectly. 3. Methodology The research was conducted using a structured questionnaire designed to answer the research objectives. The questions were divided into two parts, with the first part consisting of five questions that focused on the demographic profile of the respondent. The second part of the questionnaire focused on all four variables mentioned by the objectives (three independent variables and one dependent variable) and employed a five-point Likert scale to measure the response of the asnaf concerning the variables mentioned. A score of 1 would indicate that the respondent absolutely disagree with the statement given while a score of 5 would indicate that the asnaf absolutely agree with the statement. Anything in between would be scored either 2, 3 or 4 depending on the respondent’s level of agreement with statement. The higher the score the higher the level of agreement. Each variable would have four questions making a total of 16 questions for all the independent and dependent variables. Each of the variables will have its scores added up and averaged to give an overall indication of how a respondent feels concerning a particular variable. The questionnaire was distributed by area sampling, as the targeted area for this study is in the Klang Valley, to be specific, the Districts of Klang and Petaling. The units of analysis are the recipients of the capital assistance from the state alms organization. The total number of recipients of alms in these two districts for the year 2011 comprised 5,438 family units. Capital assistance is one of the several types of assistance that the recipients received from the LZS. Therefore, to ensure that the sample size was relevant, the number of questionnaires distributed totalled 100 following the rule of thumb proposed by Roscoe (1975), which indicates that it is appropriate to have a sample size of larger than 30 and less than 500 to minimize committing Type II errors. In addition, based on the online sample size calculator developed by Creative Research Systems, a sample size of 100 and a population of 5,438 would entail a confidence interval of 9.71 at the 95 per cent confidence level (www.surveysystem.com/sscalc.htm). The questionnaire was designed using past literature that is related to the objective of the study. Each questionnaire was assigned a serial number to avoid redundancy, which could affect the result. The questionnaire was set up in a bilingual format and the translation process of the questionnaire from Bahasa Melayu to English and vice versa was executed in order to ensure consistency. Even though there was no urgent need to have a bilingual questionnaire since most of the respondents are from a low academic background, the bilingual format was adopted for easy reference by other interested parties. The results were then analysed with SPSS version 16 software to test the reliability, correlation and descriptive analysis. An analysis of covariance (ANCOVA) of all information gained was also done to provide a clearer picture concerning all the relationships uncovered through this research. 4. Findings This section seeks to provide insights into the responses given by the asnaf entrepreneurs pertaining to factors that impact their success. Analysis begins with a descriptive analysis of the respondents followed by reliability analysis of the questions posed in the independent variables. We will then look at the correlations between the


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independent and dependent variables before ending with regression analysis and ANCOVA using all the information available from the study. 4.1 Descriptive analysis From Table I we find that there are more male respondents compared to female with 58 male zakat recipients and 42 female. The majority of them are rather young being in the age group of 26-35 years followed by the 36-45 years age group at 28 per cent and the 18-25 year olds. In terms of education background, only 18 per cent managed to complete their study at the tertiary level.


4.2 Reliability test The overall reliability test on all the questions within the dependent variable resulted in a Cronbach’s a of 0.803. Generally, the closer the reliability is to 1.0, the better. This indicates that the questionnaire formulated has a rather good internal consistency and the respondents have a fairly similar understanding of the statements and terminology used in the questionnaire distributed. The results of the same test done on each individual dependent variable can also be seen in Table III. Although the result varies between 0.648 and 0.844, the reliability level of all of the dependent variables remains acceptable for the study (Table II). 4.3 Correlation analysis A Pearson product moment correlation describes the relationship between variables. The main result of a correlation is called the correlation (or “r”). It ranges from 2 1.0 to þ 1.0. The closer r is to þ1 or 2 1, the more closely the two variables are related. If r is positive, it

Table I. Descriptive analysis

Sex Male Female Total Age 18-25 years 26-35 years 36-45 years 46 years and above Total Academic qualification Degree Diploma SPM PMR UPSR and others Total Income RM100-RM500 RM501-RM1,000 RM1,001-RM1,500 RM1,501 and above Total

Freq.

%

Valid %

Cumulative %

58 42 100

58 42 100

58 42 100

58 100

23 30 28 19 100

23 30 28 19 100

23 30 28 19 100

23 53 81 100

3 15 59 20 3 100

3 15 59 20 3 100

3 15 59 20 3 100

3 18 77 97 100

22 58 17 3 100

22 58 17 3 100

22 58 17 3 100

22 80 97 100


means that as one variable gets larger, the other will also get larger. If r is negative it means that as one gets larger, the other gets smaller (often called an “inverse” correlation). As seen in Table III, the correlation coefficient between capital and successful asnaf entrepreneur is 0.549 with a two-tailed significance score below 0.05 at the 95 per cent level of confidence. The score obtained generally indicates that the relationship between capital and successful entrepreneurs is positively related, which means that an increase in capital would have an increase in the success of an asnaf entrepreneur. A correlation coefficient score of 0.549 indicates that the strength of this relationship is moderately strong. Next, we look at the relationship between training and asnaf entrepreneur success. From Table III, we find that the correlation coefficient between training and successful asnaf entrepreneur is 0.229. Since the number obtained is positive, we can safely conclude that there is a positive relationship between training with developing a successful asnaf entrepreneur. However, since the correlation coefficient score is 0.229, which is rather low, it indicates that the strength of the relationship is weak. In addition, Table III also shows that the significance level of this relationship is 0.022; which is less than the cut-off point of 0.05. Since the researcher was using a 95 per cent level of confidence, we conclude that the correlation is significantly related. The final correlation coefficient score in Table III is between knowledge and developing a successful asnaf entrepreneur. Based on the respondent’s feedback, we obtained a score of 0.415 with a significance score of 0.00 at the 95 per cent confidence level. From the score, we can deduce that there is a positive relationship between the asnaf knowledge and his/her success but that the strength of the relationship is moderately strong while the relationship is significant.


4.4 Regression analysis The Pearson product moment correlation used for the analysis above is good for providing an indication of the relationship and the strength of such a relationship between two variables. It could not, however, tell us how much of a change we would see in a dependent variable should we increase the independent variable by a certain figure. Variable

No. of items

Capital Training Knowledge Entrepreneur success

Asnaf success Capital Training Knowledge

Cronbach’s a

4 4 4 4

0.648 0.714 0.844 0.770

Asnaf success

Capital

Training

1 0.549 * * 0.229 * 0.415 * *

1 0.301 * * 0.444 * *

1 0.262 * *

Note: Correlation is significant at: *0.05 and * *0.01 levels (two-tailed)

(acceptable) (acceptable) (good) (acceptable)

Table II. Reliability test for capital, courses and knowledge

Knowledge

1

Table III. Relationship between capital, training, knowledge and asnaf entrepreneur success

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Table IV. Regression analysis results – model summary

For example, if the score for capital is increased by 1 per cent we would not be able to determine the percentage increase in the corresponding successful asnaf entrepreneur score. Therefore, in order to see the impact of such interaction and to also explore the relationships between the independent and dependent variable further, a regression analysis is done on the data obtained (Table IV). For the purpose of this research, regression is done using the stepwise method. The stepwise method ensures that only the variables that actually have a significant impact on the variations seen in the dependent variables are taken into account in addition to minimizing any collinearity incidences within the regression model. Although from the previous section we could see that all three dependent variables are significantly related to the independent variable, this does not necessarily mean than all three need to be in the regression equation in order to get some form of information concerning the relationships between these variables. To help us select which variable is totally and absolutely relevant, the stepwise method is found to be appropriate. From Table V we can see that two models can be used to explain the variations found in asnaf’s entrepreneurial success. Model 1 states that capital is the only variable that is relevant in explaining the success of an asnaf while Model 2 indicates that capital in addition to the existing knowledge of the asnaf is included in the regression model. In both models, training is excluded from the regression model. We decide to use the second model on the basis that the model has a higher adjusted R 2 score at 0.324. This indicates that the two main variables that significantly predict asnaf’s entrepreneurial success are capital and the asnaf’s knowledge, which together explain 32.4 per cent of the variations found in the said independent variable.

Model 1 Model 2

R

R2

Adjusted R 2

SE of the estimate

0.549a 0.581b

0.301 0.338

0.294 0.324

0.49498 0.48431

Notes: aPredictors: (constant), capital; bpredictors: (constant), capital, knowledge

Unstandardized coefficients B SE

Table V. Regression coefficients

Model 1 (Constant) Capital Model 2 (Constant) Capital Knowledge

Standardized coefficients b

t

Sig.

0.999 0.674

0.374 0.104

0.549

2.674 6.495

0.009 0.000

0.649 0.558 0.210

0.396 0.113 0.091

0.454 0.214

1.640 4.919 2.317

0.104 0.000 0.023

Note: Dependent variable: developing_successful_asnafasnaf_entrepreneur


4.5 Analysis of covariance In an attempt to gain further insights, the demographic data obtained from this research is also used to shed further light on the factors that can predict the success of an asnaf entrepreneur. Since the data that are available at hand are a mix of categorical and continuous data (categorical being the demographic data while continuous data were obtained from the questionnaire) an ANCOVA using the general linear model function in SPSS 16 is found to be the best tool to accommodate the data available. All demographic data are assigned as factors while continuous data are assigned as covariates along with an assumption of no interaction between the factors (demographic variables). Therefore, the analysis only focuses on the main effects while ignoring any interaction effects within the analysis. The results of our analysis are in Table VI. As found in the previous regression analysis, Table VI indicates that at the 0.05 significance level, even when viewed in light of demographic factors, capital and asnaf’s knowledge are found to be significant factors in contributing to the success of asnaf entrepreneurs. In addition, the inclusion of demographic factors does not impact the ability to better explain the variations seen in the success of asnaf entrepreneurs as we see a reduction in the adjusted R 2 score from 0.332 in the regression analysis while an adjusted R 2 score of 0.319 is observed in the general linear model or ANCOVA.


5. Conclusion The study indicates that, generally, the variables, such as knowledge, capital and courses can influence the success rate of the asnaf business programme. While these three variables do have a significant effect on the success of asnaf, special attention should be given to the aspects of capital adequacy and asnaf’s knowledge in helping these asnaf to be successful in their business. Only once these two issues have been properly addressed, can focusing on relevant courses to help these asnaf be given attention. Since the sample size is rather small there are undoubtedly weaknesses in the design and sampling of the data, one must exercise caution in making generalizations from this research. It is interesting to note that the findings have confirmed the slightly earlier study conducted by Abd Rahman and Ahmad (2011) concerning the need to focus on other aspects than capital assistance, such as training

Source Corrected model Intercept Sex Age Academic qualification Income Capital Training Asnaf’s knowledge Error Total Corrected total

Type III sum of squares

df

Mean square

F

Sig.

14.037a 0.510 0.253 0.765 0.414 0.134 3.220 0.189 1.565 20.311 1,193.750 34.348

13 1 1 3 3 2 1 1 1 86 100 99

1.080 0.510 0.253 0.255 0.138 0.067 3.220 0.189 1.565 0.236 7 10

4.572 2.159 1.073 1.080 0.585 0.283 13.633 0.799 6.625 5 8 11

0.000 0.145 0.303 0.362 0.627 0.754 0.000 0.374 0.012 6 9 12

Notes: R 2 ¼ 0.409 (adjusted R 2 ¼ 0.319); dependent variable: asnaf entrepreneur success

Table VI. GLM or ANCOVA on all available information from the research

JFRA 11,1

62

and relevant knowledge. Nevertheless, this study has hopefully given some interesting insights to other interested parties and should provide a solid base for future studies to pick up from. It is with sincere hope that one day we can have a model that can assist LZS in efficiently expediting their efforts in helping the needy. Notes 1. Bible (King James Version).


2. www.smecorp.gov.my/v4/ References Abd Rahman, R. and Ahmad, S. (2011), “Entrepreneurship development strategy for poor and needy recipients on capital assistance through zakat distribution”, Jurnal Pengurusan, Vol. 33, pp. 37-44. Abdul Wahab, N. and Abdul Rahim, A.R. (2011), “A framework to analyse the efficiency and governance of zakat institutions”, Journal of Islamic Accounting & Business Research, Vol. 2 No. 1, pp. 43-62. Adnan, M.A. and Abu Bakar, N.B. (2009), “Accounting treatment for corporate zakat: a critical review”, International Journal of Islamic and Middle Eastern Finance and Management, Vol. 2 No. 1, pp. 32-45. Ahmad, A.B.F. and Ahmad, A.B.R. (2009), “Islamic microfinance: the evidence from Australia”, Humanomics, Vol. 25 No. 23, pp. 217-235. Burns, A.T., Acar, W. and Datta, P. (2011), “A qualitative exploration of entrepreneurial knowledge transfers”, Journal of Knowledge Management, Vol. 15 No. 2, pp. 270-298. De Faoite, D., Henry, C., Johnston, K. and Sijde, P.V.D. (2003), “Education and training for entrepreneurs: a consideration of initiatives in Ireland and The Netherlands”, EducationþTraining, Vol. 45 Nos 8/9, pp. 430-438. Ghosh, P., Joshi, J.P., Satyawadi, R., Mukherjee, U. and Ranjan, R. (2011), “Evaluating effectiveness of training programme with trainee reaction”, Industrial & Commercial Training, Vol. 43 No. 4, pp. 247-255. Hamat, Z. (2009), “Business zakat accounting and taxation in Malaysia”, paper presented at the Conference on Islamic Perspectives on Management and Finance, University of Leicester, Leicester. Higgins, D. and Elliot, C. (2011), “Learning to make sense: what works in entrepreneurial education?”, Journal of European Industrial Training, Vol. 35 No. 4, pp. 345-367. Jusoh, R., Asimiran, S. and Ziyae, B. (2010), “The factors influencing knowledge entrepreneurship in Malaysia manufacturing companies”, Journal of US-China Public Administration, Vol. 7 No. 4, pp. 86-95. Kasim, S. (1990), “Peranan modal dalam membasmi kemiskinan”, working paper, 12-13 November. Kusuma, D.B.W. and Sukmana, R. (2010), “The power of zakah in poverty alleviation”, paper presented at Seventh International Conference – the Tawhidi Epistemology: Zakat and Waqaf Economy, Bangi, Malaysia. Lourenco, F. and Jayawarna, D. (2011), “Enterprise education: the effect of creativity on training outcomes”, International Journal of Entrepreneurial Behavior & Research, Vol. 17 No. 3, pp. 224-244. Mohd Balwi, M.A.W. and Abd Halim, A.H. (2008), “Mobilisasi zakat dalam pewujudan usahawan asnaf: satu tinjuan”, Jurnal Shariah, Vol. 16 No. 3, pp. 567-584.


Muhamat, A.A. and Rosly, H.E. (2010), “Credit guarantee corporation (CGC) Malaysia Berhad operations: an extending credit guarantee to Malaysian SMEs”, Business Management Quarterly Review, Vol. 1 No. 4, pp. 22-33. Muhamat, A.A. and Rosly, H.E. (2011), “The non-Muslims response towards Ar-Rahnu (Islamic pawn broking) services: an empirical study on the Ar-Rahnu clients in Klang Valley, Malaysia”, Proceedings of Humanities, Science and Engineering (CHUSER) 2011, Penang, Malaysia. Omerzel, D.G. and Antoncic, B. (2008), “Critical entrepreneur knowledge dimensions for SME performance”, Industrial Management & Data Systems, Vol. 108 No. 9, pp. 1182-1199. Rauch, A. and Frese, M. (2007), “Let’s put the person back into entrepreneurship research: a meta-analysis on the relationship between business owners’ personality traits, business creation and success”, European Journal of Work and Organizational Psychology, Vol. 16 No. 4, pp. 353-385. Robinson, P.B. (1994), “The effect of education and experience on self-employment success”, Journal of Business Venturing, Vol. 9 No. 2, pp. 141-156. Roscoe, J.T. (1975), Fundamental Research Statistics for The Behavioural Sciences, 2nd ed., Holt, Reneharte & Wilson, London. Sarri, K.K., Bakouros, I.L. and Petridou, E. (2010), “Perspective on training: entrepreneur training for creativity and innovation”, Journal of European Industrial Training, Vol. 34 No. 3, pp. 270-288. Wickramansinghe, N. and Sharma, S.K. (2005), “Key factors that hinders SMEs in succeeding in today’s knowledge based economy”, International Journal of Management and Enterprise Development, Vol. 2 No. 2, pp. 141-158. Widiyanto, M.C.H. and Ismail, A.G. (2010), “Improving the effectiveness of Islamic micro-financing: learning from BMT experience”, Humanomics, Vol. 26 No. 1, pp. 66-75. Yoo, D.K., Vonderembse, M.A. and Ragu-Nathan, T.S. (2011), “Knowledge quality: antecedents and consequence in project teams”, Journal of Knowledge Management, Vol. 15 No. 2, pp. 329-343. Further reading Abdul Rahim, A.R. (2010), “Islamic microfinance: an ethical alternative to poverty alleviation”, Humanomics, Vol. 26 No. 4, pp. 284-295. Higgins, D. and Aspinall, C. (2011), “Learning to learn: a case for developing small firm owner/managers”, Journal of Small Business and Enterprise Development, Vol. 18 No. 1, pp. 43-57. Jiao, H., Ogilvie, D.T. and Cui, Y. (2010), “An empirical study of mechanisms to enhance entrepreneurs’ capabilities through entrepreneurial learning in an emerging market”, Journal of Chinese Entrepreneurship, Vol. 2 No. 2, pp. 196-217. Mohd Balwi, M.A.W., Che Abdullah, A.S., Abd Halim, A.H. and Mohamad, N. (2008), “Pembangunan usahawan asnaf melalui bantuan dana dan latihan lembaga zakat Selangor: satu sorotan”, Seminar Keusahawanan Islam II, Peringkat Kebangsaan. Singapore Government (n.d.), A Guide to Zakat Islamic Religious Council of Singapore, available at: www.muis.gov.sg/cms/services/zkt.aspx?id¼2232 Corresponding author Amirul Afif Muhamat can be contacted at: [email protected]

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