Governance and Trust in Zakat Institution Erika Takidah and Ajeng Pratiwi Accounting Education Department, Faculty of Economics, Universitas Negeri Jakarta Indonesia, Jakarta, Indonesia erikatakidah@unj.ac.id, ajengpratiwi14.ap@gmail.com Keywords: Governance, Accountability, Transparency, Sharia Compliance, Trust, Zakat Institution. Abstract: As one of the five basic pillars in Islam, zakat is an obligatory upon every adult, mentally stable,and financially-able moslem. As a result, millions of moslems donate their zakat through zakat institusions. In the management of zakat funds, it is very to obtain the trust from the zakat payers (muzakki). This paper seeks to explore the zakat payers perception of governance and and its effect to the trust in a zakat institution. Perception of accountability, transparency and sharia compliance represents the governance of Badan Amil Zakat Nasional (Baznas), as a zakat management institution. The survey method was applied in this research and with quantitative approach. The paper examines relation among accountability, transparency, sharia compliance and 100 zakat payers’ trust in Baznas. The result of this research showed that the accountability, transparency and sharia compliance influenced a muzakki’s trust in Baznas. Sharia compliance performs the strongest influence on trust among the studied variables. The paper relies heavily depend on a muzakki perception of Governance and Trust. Selection of limited indicators for this research may affect the results of the study. This paper highlights the need of an increasing trust through relevant disclosure of accountability, transparency and shariah compliance information to build a muzakki perception based on the annual report of zakat institution. 1 INTRODUCTION As the largest moslem country Indonesia has huge potential of zakat therefore the responsibility of paying zakat is part of worship and duties on each moslem. The research results of Badan Amil Zakat Nasional (BAZNAS) in 2015 stated that the potential of zakat in Indonesia reached Rp 442 trillion or equivalent to 3.4 percent of Indonesia's Gross Domestic Product (GDP). But in fact, the zakat that is absorbed and managed by zakat management institution until 2016 reaches only Rp 4.4 trillion or one percent of its potential. This shows that Muslims currently have less interest to pay zakat in zakat management institutions. The development of zakat management institutions has not been accompanied by the increasing interest of the community to pay zakat in zakat management institution. The cause is optimalisation of zakat institution and public trust to zakat management institution is still low. Muzakki trust is very influential to zakat collection targets. The creation of muzakki trust, is expected to increase muzakki both in terms of quantitative and qualitative, so that zakat collection targets are achieved. Furthermore, muzakki trust will also lead to the purpose of zakat management, namely community empowerment and poverty alleviation. Regard to zakat institution confidence issues, there are several factors that are considered on muzakki trust. The first factor is accountability. The management of zakat, infaq, and shadaqah are considered to have weaknesses in aspects of public accountability, accountability, transparency, and institutional arrangement (Shabri, 2014) . That is why the government issued Undang-Undang No. 23 Tahun 2011 on the Management of Zakat. The current phenomenon, the issue of accountability and transparency is still the main problem that overwhelms most of the zakat management institutions in Indonesia, whether managed by the government or private. The second factor that affects trust is transparency or openness. The phenomenon that often happens people have doubts to pay their zakat through zakat management institution because it is considered less transparent. Therefore, transparency of financial statements, management and attitudes is important to increase the trust of muzakki to zakat management institution (Mukhlis and Beik, 2013). 870 Takidah, E. and Pratiwi, A. Governance and Trust in Zakat Institution. In Proceedings of the 1st International Conference on Islamic Economics, Business, and Philanthropy (ICIEBP 2017) - Transforming Islamic Economy and Societies, pages 870-875 ISBN: 978-989-758-315-5 Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved