Tabung Haji’s financial crisis stemmed from a combination of financial manipulation, weak governance, risky investments, interference by vested interests and a lack of transparency, the Royal Commission of Inquiry (RCI) found.
The findings were highlighted by Minister in the Prime Minister’s Department (Religious Affairs) Dr Zulkifli Hasan during a special sitting of the Dewan Rakyat on Aug 11 to explain the 211-page RCI report and the measures taken to restore Tabung Haji’s financial position.
Here are the key takeaways from the special parliamentary sitting:
Financial position was repeatedly flagged
Bank Negara Malaysia (BNM) had issued five warning letters to Tabung Haji’s chairman and the Minister of Religious Affairs over the widening gap between the institution’s assets and liabilities.
Zulkifli said the central bank had warned that the situation needed to be rectified immediately, as Tabung Haji’s position at the time had the potential to create a systemic risk to Malaysia’s financial stability.
The warnings were followed by a reprimand from the Auditor-General over changes to Tabung Haji’s impairment policy, which was revised twice in 2017 to show higher profits.
PwC confirmed financial manipulation
Following the warnings, Tabung Haji’s new board appointed PwC in 2018 to reassess its financial position and performance.
The audit firm subsequently confirmed financial manipulation and found that only RM556 million of Tabung Haji’s RM4.6 billion in total assets had been valued by professional valuers.
The RCI also found that Tabung Haji’s financial statements had been manipulated to show higher profits, while asset valuations outside its audited financial statements were manipulated using the Realisable Asset Value method.
High profit distributions worsened the problem
The RCI found that Tabung Haji’s decision to announce high profit distributions despite its underlying financial performance was a significant breach of the Tabung Haji Act.
Its impairment policy was changed twice in 2017, increasing reported profits and allowing an additional RM600 million hibah to be distributed.
BNM had raised concerns that the high profit distributions could push Tabung Haji’s already low reserves into negative territory.
The asset-liability deficit widened by more than RM10 billion in the fourth quarter of 2018, leaving only three months to find a solution.
Government faced RM74.5 billion exposure
The financial position also left the government exposed to around RM74.5 billion in liabilities as Tabung Haji deposits were fully guaranteed by the government.
Zulkifli said the institution’s position at the time had the potential to create systemic risks to the country’s financial stability.
Tabung Haji also recorded net withdrawals of around RM6 billion over a short period in 2019 after a 1.25% hibah for 2018 was announced.
RM12.6 billion in investment losses
The RCI findings also covered Tabung Haji’s investment losses, which totalled RM12.6 billion.
Under the recovery and restructuring plan, RM10 billion was addressed through the 2018 Recovery Plan, while the remaining RM2.6 billion was progressively addressed through the end of 2025.
As part of the restructuring, Tabung Haji transferred 106 listed shares, 29 properties and an oil palm plantation company to Urusharta Jamaah Sdn Bhd.
Political appointments and governance came under scrutiny
The RCI found the appointment of active politicians to Tabung Haji’s administration inappropriate and recommended that no active politicians be appointed to its management.
Zulkifli said Tabung Haji’s leadership is now appointed based on integrity, competence and experience, in line with criteria set by BNM.
The broader reforms since 2018 have focused on restoring Tabung Haji’s financial position, strengthening governance and accountability, improving investment quality, providing sustainable returns to depositors and ensuring the affordability of haj.
Recovery has put Tabung Haji on stronger footing
Zulkifli said Tabung Haji is now in a much stronger position following the institutional recovery process.
The institution has implemented more than 75% of the RCI’s 25 recommendations as of July 30, with the remaining relevant recommendations being progressively implemented.
The government had chosen to give Tabung Haji space to restore its institution before making the RCI report public.
The report, which covers weaknesses in Tabung Haji’s management and operations between 2014 and 2020, was made public on July 29 after being presented to the Yang di-Pertuan Agong on Aug 30, 2022.
Enforcement action now underway
The Cabinet has agreed for a comprehensive investigation to be carried out immediately by enforcement agencies based on the RCI’s findings.
The Malaysian Anti-Corruption Commission and Royal Malaysia Police have since detained several individuals linked to alleged misappropriation identified in the report.
Zulkifli said the government would not compromise on allegations involving abuse of power or breach of trust involving Tabung Haji’s funds.
Depositors’ zakat obligations fulfilled
Zulkifli also sought to reassure Tabung Haji depositors over the status of their zakat payments.
He said Tabung Haji’s Shariah Advisory Committee had determined that zakat payments made on behalf of depositors before the introduction of the wakalah concept in 2019 were valid and complied with Shariah requirements.
He said the institution had consistently fulfilled its zakat obligations in accordance with the decision of the National Fatwa Committee.
The RCI had recommended that Tabung Haji’s zakat practices be referred to the National Council for Islamic Religious Affairs’ Muzakarah Committee. The matter was presented and endorsed by the committee in June 2024 and subsequently brought to the attention of the Conference of Rulers in October 2024.
Hajj policy set for further changes
Tabung Haji is also finalising improvements to its haj management policy, particularly on eligibility and waiting periods.
Zulkifli said the changes would introduce a clearer, more structured and systematic approach based on the concept of istito’ah, or ability, with greater emphasis on early preparedness.
Meanwhile, reforms have helped keep the cost of performing the haj at RM33,300 for three consecutive seasons from 2024 to 2026 despite rising costs and inflation.
The government said the reforms were aimed not only at restoring Tabung Haji’s finances but also at protecting depositors, maintaining affordable haj costs and building a more professional and sustainable Islamic institution.
Zulkifli said every decision involving Tabung Haji must ultimately be guided by trust and the confidence of its depositors, whose savings are intended to help them fulfil their pilgrimage.
