“TH is, first and foremost, a savings and financial institution and its travel operations serve to facilitate the haj”
by AUFA MARDHIAH & AZALEA AZUAR
LEMBAGA Tabung Haji (TH) has defended its dual-role structure and investment strategy following questions looming around its mandate and depositor concentration.
The pilgrimage fund said it remains committed to serving the Malaysian Muslim community through regulated, Shariah-compliant financial management and pilgrimage services.
In a written statement to The Malaysian Reserve (TMR) dated May 23, TH said it has progressively implemented long-term regulatory safeguards since its 2018 restructuring and has closely adhered to the recommendations of the Royal Commission of Inquiry (RCI).
TH further explained that it is a unique Islamic institution responsible for the comprehensive and systematic delivery of haj management services for Malaysian pilgrims.
“TH is, first and foremost, a savings and financial institution and its travel operations serve to facilitate the haj,” it said.
TMR’s article on May 12, 2025, examined several reform proposals for the pilgrim fund
Structured Investments Post-restructuring
Following the 2018 bailout and asset clean-up, TH stated that it adopted a conservative Strategic Asset Allocation (SAA) framework. This framework is designed to ensure prudent investment practices, promote long-term financial sustainability, and align with the institution’s risk appetite. It is reviewed every three years with input from external consultants and is subject to approval by the minister responsible for TH.
As of 2024, 54% of its portfolio is allocated to fixed income instruments, equities (26%), property (12%), money market (5%) and private equity (3%). Notably, approximately 25% of the current portfolio is made up of government-issued sukuk that were transferred to TH as part of the 2018 restructuring and asset recovery exercise.
These sukuk, issued by the government to stabilise TH’s financial position at the time, continue to provide a stable income stream and play a key role in maintaining the fund’s overall asset quality and liquidity.
The pilgrimage fund said its equities exposure includes strategic stakes in long-held subsidiaries such as Bank Islam (M) Bhd, Syarikat Takaful Malaysia Keluarga Bhd (Takaful Malaysia), TH Plantations and TH Properties.
“We believe the current adopted SAA is consistent with our long-term objective of delivering sustainable and competitive risk-adjusted returns,” it said.
For the past four years, TH has declared returns ranging between 3.1% and 3.25%, inclusive of zakat payments made on behalf of depositors.
It added that its portfolio mix is intentionally conservative shaped by past lessons and guided by risk management priorities.
It also clarified that the declared returns in recent years already include zakat paid on behalf of depositors, which amounted to 2.57% in 2024.
Rejects Accusations of Elite Bias
In response to the criticisms that it disproportionately serves wealthy depositors who use the fund as a low-risk savings vehicle, TH clarified that post-haj account holders now comprise less than 25% of its deposit base.
“Much has been said about TH having a large concentration of depositors among the super-rich. That may have been a concern in the distant past. Today, the situation is significantly healthier,” it said.
Since the 2018 overhaul, TH emphasised that its dividend distribution policy adheres strictly to accounting standards, allowing payouts only when assets exceed liabilities. It also rejected proposals to impose limits on depositors based on wealth or haj status.
“There is no need to discriminate against the class of depositors or to be accusatory towards these investors.
“TH and the Muslim Ummah are very grateful to them for continuing to place their trust and funds in TH, despite the fact that the returns are not particularly high,” it added, noting that the fund operates under a wakalah (agency) contract, whereby depositors understand that a portion of their returns may be used to help subsidise the haj costs of other pilgrims.
Cross-subsidisation Remains Transparent
Apart from that, TH reaffirmed that depositors are aware that part of their returns is used to support lower-income pilgrims through the Haj Financial Support Programme (HAFIS), which has subsidised over RM2.8 billion since 2001. The fund estimates that this reduction in depositor returns amounts to around 0.3%.
“We even conducted a survey and were pleased to find depositors are fully aware of this and are willing to support the Ummah through their contributions,” it said.
RCI Recommendations Guide Current Reforms
Regarding appointments to its board, TH clarified that, in accordance with the Royal Commission of Inquiry (RCI) findings, it has refrained from appointing politicians. The current board consists entirely of professionals with relevant expertise and experience, reflecting the RCI’s clear recommendation to ensure political insulation and strengthen governance.
Furthermore, the RCI strongly opposed proposals to split TH into separate entities for financial management and Hajj services, warning that such fragmentation would compromise the effectiveness of its integrated operational model, which is designed to provide seamless and efficient services to Malaysian pilgrims.
“To treat TH as a glorified travel agent defeats the whole purpose of encouraging systematic savings by the Ummah to plan for their haj journey,” it added.
Currently, the fund is actively collaborating with both Bank Negara Malaysia (BNM) and the Securities Commission (SC) to explore suitable oversight mechanism. Concurrently, it is working on amendments to the Tabung Haji Act to establish a formalised regulatory framework that enhances transparency and accountability.
TH emphasised that these initiatives are well underway, with the primary objective of ensuring professional and independent supervision of the fund by one of the statutory bodies, in accordance with RCI’s recommendations. This is intended to protect depositor interests and guard against political interference, thereby strengthening the fund’s governance and public trust.
The pilgrimage fund says its equities exposure includes strategic stakes in long-held subsidiaries such as Bank Islam and Takaful Malaysia
Commitment to Haj Mission
Since its establishment, TH has facilitated the pilgrimage for over 1.5 million Malaysians. Its commitment to excellence has been recognised with three Labbaitom awards from Saudi Arabia, honouring its outstanding performance in haj operations.
“Our role continues to prioritise the well-being of Malaysian pilgrims through the comprehensive and systematic management of haj services,” it said.
The statement was issued in response to an article by TMR published on May 12, titled “Returning Tabung Haji to Purpose,” which examined several reform proposals including capping large deposits, restructure TH’s investment operations and reconsider its overall governance model.
In the article, academics interviewed by TMR urged TH to refocus on its core mandate of haj facilitation and explore hybrid financing models, such as the use of waqf, to help subsidise pilgrimage cost for lower-income groups.
Among other recommendations, they also called for professionalising TH’s board, eliminating political appointments and enhancing regulatory oversight.
TMR also contacted the office of Religious Affairs Minister Datuk Dr Mohd Na’im Mokhtar to further comment. In response, his representatives said that TH’s official statement is “sufficient”.
That said, TH reiterated its dual mandate as both a religious institution and financial entity.
“It is not true that TH is unregulated or operating without safeguards.
“We are currently in the final phase of addressing legacy investments and remain firmly committed to long-term sustainability, protecting depositor interests and fulfilling the spiritual mission entrusted to us.”
The pilgrim fund also reassured the public of its continued dedication to the welfare of Malaysian pilgrims.
- This article first appeared in The Malaysian Reserve weekly print edition
The post TH: Dual-role structure, depositor policy ideal for mandate appeared first on The Malaysian Reserve.
