Tabung Haji: Depositor Trust Comes First, Dividends Are Not Everything

By Norsyafawati Ab Wahab

KUALA LUMPUR, Aug 19 (Bernama) -- As depositors, Muslims should reaffirm their understanding of the fundamental principle behind the establishment of Lembaga Tabung Haji (TH), which was created to help Muslims manage their savings for the purpose of performing the Hajj, rather than treating dividend announcements as the primary measure of the institution’s performance.

Therefore, lessons should be learnt from the decisions of TH’s previous leadership, which continued to declare dividends even when the institution’s financial position and reserves were at worrying levels, as revealed in the Royal Commission of Inquiry (RCI) report relating to the management and operations of TH.

The situation was akin to someone who appeared healthy on the outside but was actually suffering from serious “cancer” within the body.

In TH’s context, annual dividend announcements gave the impression that the institution was always in good health, whereas the RCI report revealed the existence of serious problems in terms of its financial position and governance since 2014.

The RCI report disclosed that TH’s financial health continued to deteriorate since 2014, resulting in five warning letters from Bank Negara Malaysia (BNM) between August 2014 and September 2016.

The warnings were addressed to the TH Chairman and the Minister responsible, following concerns over the institution’s financial position and the systemic risk to the country’s financial system should TH experience a liquidity crisis.

This situation warrants serious attention, given that TH manages tens of billions of ringgit in savings belonging to more than nine million depositors, in addition to being one of Malaysia’s largest institutional investors.

The RCI found that profit distributions declared before 2018 were inconsistent with the requirements of the Tabung Haji Act 1995 when TH’s assets did not exceed its liabilities, including the depositors’ savings fund.

The findings demonstrate that an institution’s performance cannot be assessed solely through dividend announcements when its actual financial position is affected by the use of creative accounting, breaches of the Malaysian Financial Reporting Standards, and changes to impairment policies that failed to provide a fair and true representation.

Irregularities in the financial reporting were also confirmed by audit firm PricewaterhouseCoopers in its 2018 report.

The failure to properly address those warnings caused TH’s financial position to deteriorate further, with its asset-liability deficit widening to approximately RM10 billion by the end of 2018. This required a government bailout to prevent a larger financial crisis.

The mission to rescue TH involved government intervention at end-2018 through the establishment of Urusharta Jamaah Sdn Bhd, specifically to take over TH’s underperforming assets and investments worth RM19.9 billion under a financial recovery plan designed to address the RM10 billion deficit at the time.

With the spirit and trust entrusted to them by depositors, the new leadership and staff of TH have continued to shoulder their responsibilities in rectifying weaknesses from the previous management, including implementing the recommendations put forward in the RCI report.

The report put forward 25 recommendations for improvement, 75 per cent of which had been implemented by TH as of July 30 last year, while the remainder are still being addressed, including amendments to the Tabung Haji Act.

These commitments have yielded results, with TH’s financial health continuing to recover and the institution recording its best performance in eight years in 2025, with a dividend of 3.5 per cent.

The “cancer” has now been successfully treated and is undergoing appropriate follow-up treatment.

However, it must once again be emphasised that this recovery should not make dividends the sole measure of TH’s success.

Instead, it must be followed by continued efforts to strengthen the institution’s financial position, governance, and capacity to fulfil the original objectives for which it was established.

The comprehensive recovery measures currently being undertaken, and those to be implemented, by TH’s present leadership are crucial to restoring depositors’ confidence in the institution’s integrity and stability.

The savings of Muslims intended to fulfil the Fifth Pillar of Islam must be managed by TH with the utmost honesty, trustworthiness, and integrity.

-- BERNAMA