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Purpose

This study aims to analyze the determinants shaping Indonesian zakat institutions’ competitiveness and their effects on performance and community welfare, applying Porter’s Diamond framework to a faith-based, nonprofit context.

Design/methodology/approach

A mixed-method approach integrates partial least squares structural equation modeling analysis of 293 Zakat institutions with qualitative insights from surveys, interviews and focus group discussions.

Findings

The study confirms Porter’s Diamond as a useful framework for assessing zakat institutions’ competitiveness, though it requires adaptation to reflect philanthropic characteristics – particularly condition factors. Governance emerges as the central driver, reinforced by demand conditions, organizational strategy and supporting industries.

Research limitations/implications

The analysis assumes welfare impact rests exclusively on institutional performance, overlooking recipient behavior. Future research should incorporate socioeconomic and cultural determinants of zakat use and address the limits of context-blind indices.

Practical implications

The paper advances actionable recommendations: strengthen governance through rigorous standards, raise public awareness, foster multistakeholder partnerships, deepen community engagement and accelerate digital transformation.

Social implications

Improved competitiveness of zakat institutions strengthens donor trust, boosts compliance and delivers sustainable welfare gains for Mustahik communities.

Originality/value

This study pioneers the application of Porter’s Diamond to Islamic philanthropy, integrating Sharia principles into competitiveness analysis and generating insights for policy and practice.

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