Productivity growth of zakat institutions in Malaysia An application of data envelopment analysis

Purpose - The purpose of this paper is to analyze the changes in productivity of zakat institutions in Malaysia from 2003 to 2007. The data consist of a panel of 14 State Islamic Religious Councils (SIRCs) in Malaysia. Efficiency is measured by the Malmquist Index, using a data envelopment analysis (DEA) technique. Design/methodology/approach - This paper uses Malmquist Productivity Index, using a DEA technique. The Malmquist productivity measures are decomposed into two components: efficiency change and technical change index. Findings - The results showed that total factor productivity (TFP) has increased slightly for the whole industry, which is mainly due to the technical change rather than the efficiency change. Further decomposition of the efficiency change into its pure technical and scale efficiency components suggest that the pure efficiency is found to be a more important source of efficiency change than scale efficiency component. Originality/value - This paper investigates the productivity and efficiency of zakat institutions in Malaysia. It will be of value to provide evidence to the policy makers to improve the efficiency of the institutions.