Forecasting zakat collection using artificial neural network

Abstract

'Zakat', "that which purifies" or "alms", is the giving of a fixed portion of one's wealth to charity, generally to the poor and needy. It is one of the five pillars of Islam, and must be paid by all practicing Muslims who have the financial means (nisab). 'Nisab' is the minimum level to determine whether there is a 'zakat' to be paid on the assets. Today, in most Muslim countries, 'zakat' is collected through a decentralized and voluntary system. Under this voluntary system, 'zakat' committees are established, which are tasked with the collection and distribution of 'zakat' funds. 'Zakat' promotes a more equitable redistribution of wealth, and fosters a sense of solidarity amongst members of the 'Ummah'. The Malaysian government has established a 'zakat' center at every state to facilitate the management of 'zakat'. The center has to have a good 'zakat' management system to effectively execute its functions especially in the collection and distribution of 'zakat'. Therefore, a good forecasting model is needed. The purpose of this study is to develop a forecasting model for Pusat Zakat Pahang (PZP) to predict the total amount of collection from 'zakat' of assets more precisely. In this study, two different Artificial Neural Network (ANN) models using two different learning algorithms are developed; Back Propagation (BP) and Levenberg-Marquardt (LM). Both models are developed and compared in terms of their accuracy performance. The best model is determined based on the lowest mean square error and the highest correlations values. Based on the results obtained from the study, BP neural network is recommended as the forecasting model to forecast the collection from 'zakat' of assets for PZP.