Alms-giving was regulated by law only in 1999, under then president BJ Habibie. Government-sanctioned alms agencies (BAZ) and independent zakat foundations (LAZ) were authorised, leading to the creation of more than a dozen national independent agencies and several hundred local agencies to manage Muslim charitable giving throughout Indonesia.
There are currently 17,763 BAZs overseeing 1.1 million zakat collection units (UPZ) in Indonesia, according to the Religious Affairs Ministry.
The money raised by these smaller organisations is immense: there has been an approximately 24 per cent rise annually in the amount of zakat collected over the last 12 years.
The National Alms Agency (Baznas) says that independent alms agencies accounted for 38 per cent of the Rp 1.73 trillion (S$179 million) of zakat funds collected nationwide in 2011, compared to Rp 1.07 trillion collected by Baznas' local and regional agencies.
However, the long-standing co-operation between the government and independent alms-management foundations has become strained after the House of Representatives passed the 2001 Zakat Management Law, which gave Baznas the authority to supervise zakat collection and distribution across the nation.
The law - which stipulates that zakat management must be directly managed by Baznas, licensed mass organisations or legal entities endorsed by Baznas and local authorities - threatens to close small, community alms-management organisations.
There are also criminal penalties under the law: individuals collecting alms without a license can be sentenced to up to a year's imprisonment or fined up to Rp 50 million.
"There are many clerics or mosques in the country's remote areas who have been trusted by local people to manage their alms for years," the alms agency Rumah Zakat (RZ) CEO Nur Efendi said in a recent interview. "How can the state criminalize them for helping local communities channel their zakat payments to the needy?"
In protest, dozens of private alms agencies, including Jakarta-based Dompet Dhuafa (Wallet for the Poor), Bandung-based RZ and Surabaya-based Yatim Mandiri (Independent Orphans) filed a judicial review of the law with the Constitutional Court, which was rejected in 2013.
However, the court issued a ruling - since codified by Government Regulation No. 14/2014 - saying that individuals or community organisations can run alms-management activities in the absence of government-sanctioned foundations or other licensed operators.
Meanwhile, Dompet Dhuafa executive Sabeth Abilawa said that the ruling needed to be accompanied by guidelines from Baznas on how local organisations could be licensed as alms agencies.
"What many unregistered alms agencies currently need is legal certainty, whether they can continue their operations or not," Sabeth said.
According to the law, a revamped Baznas is slated to have 11 commissioners: three representing the government and eight representing Muslim figures and professionals.
In December, the Religious Affairs Ministry completed screening non-government candidates and proposed 16 candidates, including former education minister Bambang Sudibyo, Muslim scholar Masdar Farid Mas'udi and Dompet Dhuafa president director Ahmad Juwaini, to President Joko "Jokowi" Widodo, for a final decision.
Separately, Islamic finance expert Irfan Syauqi Beik, said zakat managers should not worry that the law would shutter small, unregistered organisations.
"These organisations, for instance, can join bigger alms agencies as the agencies' collection units and continue their existing operations," Syauqi said.