The Performance of Islamic Social Finance Institutions Post COVID-19: A Balanced Scorecard Approach

Introduction

Islamic social financial institutions are non-profit organizations that manage funds for community welfare (Hassan & Salma Binti Abdul Latiff, 2009). Funds are taken from rich people voluntarily and then distributed to people in need, such as zakat institutions. The management of zakat institutions certainly experiences progress and decline according to quality and competency (Wahid et al., 2012). To maintain the quality of non-profit institutions, performance measurement is also required, just like for-profit institutions. Performance measurement is considered very important in the management of a company, in other words, performance measurement is carried out for mapping strategies that will be carried out to achieve certain targets (Febriandika et al., 2023a). Febriandika (2022) used a balanced scorecard technique to evaluate the COVID-19 pandemic performance of Islamic philanthropic organisations. Non-profit organisations can also benefit from this strategy, even though the balanced scorecard was initially designed to evaluate profit-making organisations. The existence of Islamic social finance institutions such as zakat institutions is very important because it is always linked to restoring economic stability and reducing social inequality, especially after the end of COVID-19 (Yuliandoko et al., 2021).

Indonesia is a country that has the largest Muslim population in the world (Utami & Mustakim, 2021). The Muslim population represents more than 220 million people spread across 17,000 islands, but the collection of funds from zakat currently only contributes around 2% of its potential (Yuniar & Kasri, 2020). This is a benchmark in increasing the community's contribution in paying zakat, where funds must be spent by Mustahik to improve the welfare and quality of life of the community (Sa’adah & Hasanah, 2021). (Widiastuti et al., 2021) state that developing professional zakat management and organization is one of the tasks of zakat managers. Professional management and accounting can only be applied if zakat is managed well (Owoyemi, 2020). If zakat is considered only as a form of worship to realize social piety, then a professional zakat organization is needed. If individual piety is the only goal, then basically, zakat leads to the use of the Sufi system, where if someone donates, no one has to acknowledge the contribution.

Zakat is also believed to be able to be a source of economic balance in society because it can be a tool for evaluating the performance of the National Zakat Amil Agency, which has implications for muzakki as a trust for entrusting their zakat funds (Shobron & Masruhan, 2017). In addition, data on people who are entitled to receive zakat assistance is often unclear. As a result, this creates obstacles in the distribution of zakat (Sari et al., 2021). The distribution that is carried out is the intervention of the person who distributes it. Good company management will make the distribution of zakat funds smooth and unhindered (Beik et al., 2021).

Literature Review

Performance Management

Performance is a description of the level of achievement of the implementation of an activity, program, or policy in realizing the organization's goals, objectives, vision, and mission (Aydin, 2015). Performance is defined in an organization's strategic plan in addition, the level of success or efficiency in achieving goals or carrying out tasks, whether at the individual, organizational, system, or other areas, is called performance (Carmeli & Tishler, 2004). Performance evaluation involves measuring results and achievements against standards or expectations (Palaniappan et al., 2021).

Failure of a company's management system is usually not caused by a lack of ability or effort by its managers (Dubrovski, 2009), so the real reason why the company's performance is low must be found (Staw et al., 1983). With a strategic management system, an integrated set of processes and tools are used by an organization to develop strategies, apply them to operational actions, and monitor and improve effectiveness (Da Silva et al., 2020). A manager must believe that the actions taken by organizational members move the organization toward its goals. Setting job performance standards, measuring current accomplishments, comparing them to established standards, and taking corrective action when deviations occur are all components of this management control function.  Managers maintain the organization's direction by using the control function.  In order for a plan to be implemented successfully, businesses must set yearly objectives, establish policies, inspire staff, and allot resources (Kabeyi, 2019).

Balanced Scorecard

Hasan and Tibbits (2000) show that the balanced scorecard method is a formal management technique built on the basis that measurement is a prerequisite for strategic management. The Balance Scorecard aims to provide a financial, marketing, operations, and human resources perspective on a company's performance (Ha et al., 2022). When used in determining strategy, the balanced scorecard approach can be used as a method of thinking about what needs to happen in business and as a benchmark in determining company work evaluations (Liu, 2022).

The Balanced Scorecard uses a holistic approach and is a management system that is more than just a performance measurement system (Hladchenko, 2015a). It is also a management system that can channel the strengths, abilities, and special knowledge possessed by employees throughout the company to achieve long-term strategic goals (Wong et al., 2015). Implementation begins with setting goals and strategies to achieve them from four important viewpoints: financial, customer, internal, growth, and learning. Furthermore, management performance measures and objectives are set by the strategy (Hasan & Tibbits, 2000). Balanced Scorecard is a contemporary performance measurement system that focuses on measuring financial and non-financial perspectives (Febriandika et al., 2023a). This helps companies define their vision and strategy and turn it into a real business. In this method, performance can be measured and assessed by answering four main questions: how customers see us (customer perspective), what we should excel at (internal process perspective), whether we can continue to improve and create value (innovation and learning perspective), and how we see shareholders (financial perspective) (Aly & Mansour, 2017).

The Balanced Scorecard evaluates organizational performance based on four aspects, namely the financial perspective, customer perspective, internal business process perspective, and learning and growth perspective (Amer et al., 2022). The Balanced Scorecard explains that measuring financial and non-financial performance must be systematic and balanced (Cardinaels & van Veen-Dirks, 2010). A Balanced Scorecard refers to establishing a balanced score or value for several key elements of job evaluation (Malgwi & Dahiru, 2014). The balanced scorecard consists of a balanced scorecard. A scorecard is a card used to record credit points. Scorecards can be used to plan the results that individuals and departments will achieve in the future. With the help of a scorecard, the future points achieved by an individual or group will be compared with the current actual performance results. The results of this comparison are then used to evaluate the performance of people and departments in a company (Groen et al., 2012). The balanced scorecard is used to measure short-term and long-term performance from financial, non-financial, internal, and external perspectives (Malgwi & Dahiru, 2014).

BSC starts with financial goals and interpretations, which are the financial driving force of a long-term sustainable value-creation process (Brozović et al., 2020). In terms of financials, the BSC model has additional measures such as general income from operations, increased economic value, and income on leased capital (Tuan, 2020a). The goal of the BSC model is to increase revenue by achieving the goals of increasing current customer value, creating opportunities, and increasing economic value (Chalmeta & Ferrer Estevez, 2023). Revenue, profit, total assets, outstanding debt, and bad debt levels are all metrics that should be linked to financial objectives in the Balanced Scorecard (Tuan, 2020b). The goal of business is to make a profit. From a financial performance point of view, the importance of organizational achievements is demonstrated. The financial strategy for zakat institutions is to increase the receipt of funds from individuals who pay zakat for activities to utilize funds in the fields of education, economy, health, and community empowerment (Nila Mustika et al., 2019).

Measuring performance from the customer's perspective is a way to find out how customers view the company. To achieve customer satisfaction, it is necessary to build good relationships with customers (Funke et al., 2022). People who pay zakat and Mustahiq are two consumers who must be cared for and served by zakat institutions (Mawardi et al., 2023a). The strategic goal is to increase loyalty with people who pay zakat and provide satisfaction to Mustahiq with good service (Utami Wikaningtyas & Novitasari, 2020). The increased distribution of ZIS funds contributes to economic growth, as these funds are practical and consumptive, serving as additional working capital for specific businesses (Mawardi et al., 2023b). The performance of the Zakat Institution should be assessed comprehensively by evaluating the organization's success in fulfilling community needs through a modified performance measurement approach, ensuring its effective use in accurately evaluating public accountability (Utami Wikaningtyas & Novitasari, 2020).

Zakat Institutions

Islamic social finance institutions such as Zakat institutions have the goal of an innovation process to face the challenges of the post-pandemic era and the needs of society (Madah Marzuki et al., 2023). The model that effectively facilitates zakat collection and distribution has several notable impacts. Firstly, it enables the rapid dissemination of awareness regarding the significance and religious obligations of zakat at the local level. Secondly, this approach helps address challenges in zakat distribution, as local committees can accurately identify the conditions of eligible recipients and ensure zakat is disbursed appropriately based on clear guidelines (Febriandika et al., 2023a). The financial perspective evaluates performance in terms of profitability and the achievement of financial goals, focusing on factors such as sales growth, return on investment, operating income, and cash flow (Utami Wikaningtyas & Novitasari, 2020). As a non-profit organization, the Zakat Institution must implement effective financial management. The customer perspective serves as a core component of any business strategy, encompassing the unique combination of products, pricing, relationships, and brand image offered to customers (Malgwi & Dahiru, 2014). From this viewpoint, the organization must showcase how it distinguishes itself from competitors by maintaining, attracting, and nurturing relationships with its target customers.

From an internal business perspective, the strategic measure is to improve the quality of ZIS services needed by Mustahiq through various programs that suit current community needs (Atkinson, 2006). Performance from an internal business process perspective focuses on how effective and efficient the company's processes are and how to maintain the value of each chain in an Islamic manner (Rafiki & Wahab, 2013). There is no reason not to maintain and improve product quality. The growth and learning perspective includes how institutions can continue to improve and create value, especially in terms of employee capabilities and motivation (Khadijah & Afif, 2019). Employee satisfaction has an important meaning, especially for institutions that provide services, because employee contributions will support the success of realizing the institution's vision and mission (Sethi et al., 2023). Thus, the strategic target from a growth and learning perspective is to increase employee satisfaction and increase motivation to work to produce quality human resources (Akdere & Egan, 2020).

Thus, there are multiple goals for this study. Namely, to analyze the performance of the National Amil Zakat Agency (BAZNAZ) Surakarta by applying the Balanced Scorecard method in 1) financial perspective, 2) customer perspective, 3) internal business process perspective, and 4) growth and learning process perspective.

Materials and Methods

This research also uses a type of research that combines qualitative and quantitative approaches. Mixed Methods research is a combined model, which combines quantitative and qualitative approaches or cross-step research processes, and mixed methods, which include quantitative and qualitative phases or stages in the study as a whole (Schoonenboom, 2018). Quantitative-qualitative research methods use numbers to display data by concluding a series of complete sentences. In this research, quantitative data is used to measure the level of respondent satisfaction with services at BAZNAS Surakarta. The results of data collection will be presented in table form and a description of the questionnaire answers. The interviewed Zakat management employees and respondents will be used as primary data.

This research was conducted at BAZNAS Surakarta City by implementing the Balanced Scorecard method. The parties involved in this research were BAZNAS Surakarta employees. Data was obtained from the authorities responsible for implementing the Balanced Scorecard method, namely managers and employees of BAZNAS Surakarta City. Employees are parties who have an important role in zakat management activities so that they run according to plan and as parties who have an understanding of zakat management and empowerment both in theory and practice. Respondents are Mustahik or people who receive zakat distributed by BAZNAS Surakarta who are affected or needy residents. Secondary data and primary data are needed when using the balanced scorecard method with scores in each category.

The validity test is used to measure whether the questionnaire is valid or not. Indicators are said to be valid if there is a relationship between each indicator that shows significant results (Riyanti et al., 2022), and a questionnaire is said to be valid if the questions can reveal something that can be estimated by the questionnaire. This validity test uses the Pearson product-moment relationship strategy with a significance level of 5% with a critical value. If the significance value of the correlation results is below 5%, it can be declared valid, and otherwise, it can be declared invalid (Febriandika, 2022).

Reliability is referred to as a measuring tool for a questionnaire, which is an indicator of a variable. A questionnaire is said to be reliable if a person's answers to statements are consistent and stable. Reliability measurements are completed through one shot, which is a measurement only once, and then the results are compared with different questions or measure the relationship between the answers to the questions. To measure reliability, the Cronbach Alpha statistical test is used (Saad et al., 2019). A variable is said to be reliable if it shows Cronbach Alpha > 0.60 (Febriandika, 2022).

The data analysis technique used in this research is qualitative data analysis. The researcher analyzed the impact of the interview results by considering the understanding of matters expressed by internal company parties and the results of observations regarding the use of performance measurement in the research object. The key performance indicators for the four perspectives utilized in the balanced scorecard are:

Table 1. The Key Performance Indicators for the four perspectives

Displayed in Table 1.

Financial performance measurements are used to assess whether a company's strategy and implementation contribute to the company (Ingle et al., 2023; Kulkarni et al., 2023; Marconcini et al., 2023; Shaheen et al., 2023). Thus, financial reports can estimate the implementation of financial performance measurements as the final result of the accounting process. The financial perspective is evaluated through two strategic objectives: (1) collection of funds, and (2) efficient distribution of funds. Eq. 1 shows ZIS Collection Growth:

Depicted below is Eq. 2 which shows the ZIS Fund Efficiency Distribution:

The level of customer satisfaction (customer satisfaction) is a way of measuring how far the level of customer satisfaction is with the services provided (Hladchenko, 2015b). In this research, customers give scores to the questionnaire according to each customer's satisfaction, which will then measure the average consumer satisfaction from the data obtained. In this research, what is meant by customer or respondent is the person who pays zakat, so the performance measurement measured is the perspective performance of customers who pay zakat funds to BAZNAS Surakarta. The average value of survey responses, represented by the Customer Index (CI), is used to estimate customer satisfaction. The steps to calculate the customer index (CI) are provided in Eqs. 3-7:

1. Count IK Maximum:

2. Count IK Minimum:

3. Count interval:

4. Count the actual IK number.

5. Match the actual IK number into the interval
6. Count the final score of Customer Satisfaction

Internal business is a measurement that includes all activities carried out by the company and then creates new products and innovations which are then offered and used to improve services that satisfy customers (Djalil & Anwar, 2022). Innovation is an idea to find out the number of work programs offered and then compare it with the targeted work program (Hladchenko, 2015a). This measurement is based on what innovations in institutional data were developed by the institution in the year concerned. From an Internal Business Innovation perspective, performance is assessed using Eq. 8.

The learning and growth perspective seeks to transform the organization into a dynamic learning entity while fostering its expansion. Eq. 9 evaluates performance from the standpoint of Employee Retention.

Delegation of employees in training or seminars is carried out to improve the quality and competence of employees held by BAZNAS Surakarta. The percentage increase in HR quality can be calculated in Eq. 10:

In the final stage, the BSC score is evaluated using Eq. 11:

Results and Discussion

Balanced Scorecard Weighting

Taking into account the impact on the institution, adjusted scoring is applied to each perspective of the Balanced Scorecard Zuev (2022). The more important or greater the influence on an institution's point of view, strategic targets, and results-sharing measures, the greater the weight given. This weight was determined by analyzing the results of interviews which stated that the priorities of BAZNAS Surakarta City were distribution and customers. The customer perspective, which is a priority, is given a weight of 50%. The weighting in second place is a financial perspective of 25%. The indicator scores for collecting and distributing ZIS funds with the strategic target of receiving funds are 10% and 15% respectively. With this value, efficiency is needed with the aim that the institution can carry out the various programs that have been planned in each period. Then the third position is 20% for the learning and growth perspective and the last is the internal business process perspective at 5%. Improving the quality and human resources of employees has an important role because employees whose performance is getting better will encourage the progress of an institution. Table 2 shows the results of financial reports related to the collection of ZIS funds each year.

Financial Perspective

Table 2. Fund collections in BAZNAS Surakarta

Source: own calculations

The collection of ZIS funds experienced a lot of fluctuation, especially in 2019 which saw a decrease in receipts of -0.5% and also infaq and alms receipts of -25%, however in the following year, namely 2020, zakat, infaq, and alms funds experienced an increase of 25% and 37%. % each. Furthermore, in 2021 the receipt of zakat funds will increase again by 46%, however, the receipt of infaq and alms will decrease again by -11%. In 2022, BAZNAS received zakat, infaq, and alms funds increasing by 19%, an increase in zakat funds, and a 63% increase in infaq and alms funds. Table 3 shows the results of the fund distribution of ZIS funds each year.

Table 3. Funds distribution report

Source: own calculations

In the ratio table above, BAZNAS Surakarta City shows an efficiency figure of more than 100% in 2022, namely 101%. Based on the efficiency measurement criteria, it can be concluded that zakat in 2021 is said to be efficient because the measurement results are at 60-80%. However, in 2018, 2019, and 2020 it can be said to be less efficient because the measurement results show criteria above 90%. From the data above, the scores of 2 financial indicators can be calculated, namely 1) collection of funds, and (2) efficient distribution of funds, respectively 8.8 (10%: 50% x 44%) and 18.75 (15%: 80% x 100%).

Customer Perspective

Measuring the customer satisfaction perspective was carried out using a questionnaire containing 14 questions to 100 respondents (Enwa et al., 2022; İlhan et al., 2022; Mobeen & Dawood, 2022; Zhang et al., 2022; Burghate & Mundada, 2023; Tabassum et al., 2023). After that, the data was processed using the IBM SPSS 24 application to obtain validity and reliability test results as shown in Table 4.

Table 4. Validity and Reliability

Source: own calculations

From the data obtained, satisfaction intervals can be determined to obtain the level of consumer satisfaction. The minimum standards set depend on the scale used in data processing:

Interval = (IKmax – Ikmin): 4

IKmax = PP x R x EKmax

  = 14 x 100 x 4

  = 5,600

IKmin = PP x R x EKmin

  = 14 x 100 x 1

  = 1,400

Interval = (5,600 – 1,400): 4

  = 1,050

Notes:

PP: Number of Questions

R: Number of Respondents

EXmax: Maximum Score

EXmin: Minimum Score

Interval Value:

- 1400-2450: categorized as "Very dissatisfied"

- 2450-3500: categorized as "Not satisfied"

- 3500-4550: categorized as "Satisfied"

- 4550-5600: categorized as "Very satisfied

The customer satisfaction index is 4855 so it can be concluded that customers are very satisfied with the services and interactions provided by BAZNAS Surakarta. The final score is then obtained from 4855 divided by 5,600 = 87%. Therefore, the score on the customer satisfaction indicator is 43.5 (50%: 100% x 87%) with details of 50% of the weight, 100% of the target, and 87% of the realization.

Internal Business Perspective

Indicators for Innovation and Internal Institutional development are taken from the number of activities carried out by BAZNAS Surakarta that have been planned. A total of 2 activities were planned and realized 100%. Based on these results, the score for the innovation development indicator within the institution is 10 (5%: 50% x 100%) with details of 5% of the weight, 50% of the target, and 100% of the realization.

Table 5. Calculation of Competency Improvement

Learning and Growth Perspective

The Learning and Growth perspective is divided into two indicators, namely 1) Employee Retention and 2) Increasing Employee Quality and Competence. Employee retention is the desire of employees to remain at BAZNAS Surakarta, which shows loyalty and a desire for longer work experience. Table 5 shows the calculation of the number of permanent employees In 2021 and 2022. In 2021, there was no decrease in employees, but in 2022 the number of employees decreased by 1 person from a total of 6 employees so the realization is 83.33% (5: 6 x 100%). Therefore, the score of employee retention is 8.33 with details of 10% of the weight, 100% of the target, and 83.33% of the realization. The score of the quality improvement indicator (Competency Improvement) is 10 (10%: 100% x 100%) with details of 10% of the weight, 100% of the target, and 100% of the realization based on Table 5.

Overall the total results from the four perspectives (Financial perspective score, Customer satisfaction score, Internal Business score, and Learning and Growth score) used in the balanced scorecard are 99.38 (8.8+18.75+ 43.5+10+8.33+10) which shows very good based on the Criteria of Performance Measurement (Abdelmuhsin et al., 2022; Ruchin et al., 2022; Turlaev et al., 2022).

Unusual consumer behavior was reported globally during the COVID-19 outbreak, such as the service industry (Lu et al., 2005; Laato et al., 2020; Wang et al., 2020). This unpredictable pandemic prompted the public to act unusually the lockdown and social distancing policy impacted the industry (Chopra et al., 2020). Islamic social finance institutions as non-profit institutions have gone through a crisis during the pandemic and are facing the post-pandemic period. Despite experiencing the COVID-19 period, the number of data collections increased due to the high enthusiasm for helping in the infaq and alms sector but decreased in the zakat fund collection sector because the number of people who were required to pay decreased due to death (Febriandika et al., 2023b).

BAZNAS Surakarta is one of the Islamic social financial institutions in Surakarta. This institution serves the distribution of Zakat, infaq, alms, Waqf, and grant funds from the community. The distribution is carried out in areas related to education, social assistance, disaster assistance, infrastructure, and other economic service assistance nationally. After the pandemic, data on fund collection in both the zakat and non-zakat sectors has also increased. Distribution during the post-pandemic period also experienced a drastic increase to recover the community's economy in the post-Covid-19 era (Atalayin et al., 2024; Chauhan & Angadi, 2024; Galea-Holhoș et al., 2024; Samaranayake et al., 2024; Shaiba et al., 2024; Varoneckaitė et al., 2024).

The results show that the customer perspective has the highest performance value of all indicators after the pandemic with a score of 43.5. This proves that customer satisfaction is an important aspect and must be considered compared to other perspectives in measuring performance as non-financial indicators. This is by several previous studies that non-profit institutions prioritize the customer satisfaction perspective compared to other indicators (Ashfahany et al., 2024). The customer satisfaction index is 4855 so it can be concluded that customers are very satisfied (range of 4550-5600).

Overall ZIS fund collection experienced a decline in 2018 but increased again drastically in the last year, namely after the Covid-19 outbreak. The results of employee retention show that employees feel comfortable and show loyalty to the institution by wanting longer work opportunities and receiving training to develop skills and competencies. However, 1 employee resigned. The condition of non-profit institutions such as Islamic social finance tends to have few employees as previous research shows that the total number of employees is below 10 people. Indicators for Innovation and Internal Institutional Development are based on the number of planned activities carried out by BAZNAS Surakarta. A total of 2 activities were planned and achieved 100% realization. Even though it was implemented, the program provided was only planned for 2 agendas and there was no special development to face the post-COVID-19 industry. This is understandable because BAZNAS is a non-profit institution that does not have many competitors so there is no incentive to increase the intensity of employee quality development and innovation.

Conclusion

This research uses the Balanced Scorecard method to evaluate the performance of BAZNAS Surakarta from several perspectives, namely financial, customer, internal business processes, and learning and growth. Based on the analysis that has been carried out, the consumer perspective has the highest score. This shows that customers are very important for the service industry in the non-profit sector.

BAZNAS Surakarta shows good financial performance by achieving targets and efficient budget management. This can be seen from the high increase in the customer satisfaction index, which also supports the organization's financial stability. A customer satisfaction index of 4855 shows that customers are very satisfied with the services and interactions provided by BAZNAS Surakarta. This reflects the organization's success in maintaining high service quality. In this perspective, BAZNAS Surakarta succeeded in realizing 100% of the two planned activities, showing that the internal business processes were running effectively and efficiently according to the plans that had been set. BAZNAS Surakarta has demonstrated a strong commitment to innovation and internal development.

Limitations and Dimensions for Future Research

The study has a limited scope and it has only taken into consideration the telecom sector, while the other industries are not considered. Also, the research study does not include and discuss the various generations of employees, as the needs of the employees vary according to their age group. Moreover, the indicators of loyalty are not mentioned, based on which Mobily measures the loyalty of its employees. For future research, it is suggested that the study should be conducted by keeping in view the other industries, as all these industries have a different setup and the employees have different demands. Moreover, it is suggested that in the future, the employee’s loyalty and retention should be measured by considering their generation.

Acknowledgments: None

Conflict of Interest: None

Financial Support: This research was funded by RISETMU (Research and Service Grant Program organized by the Muhammadiyah Higher Education Research and Development Council) batch 8 2024.

Ethics Statement: None