TH chairman Tan Sri Abdul Rashid Hussain outlined his vision for the institution's long-term financial sustainability with a proposed revision of the Tabung Haji Act 1995 (Act 535). [The details in the Business Times report reproduced at end of this posting.]
He is suggesting reforms to align with TH's operation by strengthening its depositor base, improving cost-of-funds management, and regulatory safeguards for long-term investments. The gist of his transformation is to turn TH from a syariah-based savings institution into a full fledged Islamic investment company.
Naturally it is appealing to bankers conversant with such terms as asset-liability mismatch, cost of fund and pursuit for "competitive" return. And there is a professor fascinated with digitalisation, and AI to the prospect of investment in Bitcoins and Stablecoins. But it is not unique.
Rashid is duplicating the path as a former securities salesman from Singapore who established RHB through the rapid growth of acquiring D&C and Kwong Yik Banks. He made the aggresive move to script lent Khazanah's shares to Julian Robertson's Tiger Fund. They short sell Malaysia and led him to lose RHB. Had it not for his former father-in-law, he could have been imprisoned.
TH is his second attempt at self-actualisation at the late age of 78 for another institution building, but his reform carries the risks that could deny pilgrims to enable them to perform their spiritual obligation from their hard-earned savings. Obviously he failed to learn the lesson from his past ordeals.
Prudence in banking and saving institution differs from the risk taking of stock market investors, more so corporate players who rides the cycle of acquisition/liquidate and leverage/deleverage. That is essentially what transforming TH from a syariah-based savings institution into full-fledges Islamic investment institution means.
The public perception of TH is deeply entrenched as safe, syariah-compliant savings fund for pilgrimage. By spending RM9 million on rebranding to change its identity to an investment-focused entity, it trigger concerns that depositors’ money is being put at higher risk and loss of depositor confidence.
Prioritizing profit over safety will deviate from TH's objective of establishment, erode public trust, and lead to potential mass withdrawals.
The original purpose was to facilitate Muslims’ savings for Hajj. By shifting emphasis to investments, there is a risk that its original mandate of helping Malaysians perform Hajj affordably and sustainably is diluted.
Conflict of priorities could arise and commercial pressures dominate thus making balancing Hajj subsidies, operational costs, and investment returns harder.
As an investment institution, TH will be exposed to the volatility of capital markets, property cycles, and global financial risks. It is heard the RM11 million second phase of the proposed rebranding exercise is for going international.
Policies to address asset-liability mismatch typical in Banks will put constraint on depositors expectation for liquidity and stability to withdraw when needed in view of investments tend to be long term and illiquid.
And, "competitive" return comes with greater downside risk. If investment performance less than satisfactory, TH could struggle to pay competitive hibah (dividends). Previous hibah announcement to include non-distributable income undermined its credibility.
The proposal will be vetted by the Prime Minister's Department on Islamic Affairs before forwarded to the Prime Minister. They need to be aware of the governance and oversight risk.
Investment institution is a more complex operations which require sophisticated risk management, compliance, and governance structures. They may not be up to the mark to fulfill dual expectations of TH as a religious-based body and a financial institution (with oversight similar to banks, investment funds).
Then there is the added pressure of larger investment portfolios to channel funds into strategic or bailout projects, risking mismanagement.
Another challenge is syariah compliance. To participate in more complex assets, ensuring all transactions remain fully syariah-compliant will be more complex.
Some permissible Islamic investment products such as hybrids carry higher risks or lower transparency, thus raising questions from depositors and scholars.
The change to Investment company could be framed as "commercialising Hajj savings". It will spark resistance from community leaders and politicians. More so should returns fluctuate and subsidies for poorer pilgrims become harder to sustain, thus undermining TH’s role in ensuring inclusivity.
TH underwent past crises which include being cheated by Maju holdings and forex scam. However, the scar from Rafizi's 2018 dabbling to slander on liquidity status has not healed and billions of assets stuck at then Lim Guan Eng's Ministry of Finance not returned.
Another failure or crisis at TH could have national financial repercussions, given its size and symbolic role for Malaysian Muslims. By then, the issue is beyond insufficient fund in their TH account and dependence on subsidy as it is customary in Malaysia for children to contribute into the parent's coffer when the opportunity for Haj arise.
It could spell the end of TH.
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Stronger ops, legal tweaks for stability: Tabung Haji Act in focus
By Business Times - September 2, 2025 @ 8:03am
KUALA LUMPUR: Lembaga Tabung Haji chairman Tan Sri Abdul Rashid Hussain has outlined a vision for the institution's long-term financial sustainability with a revised governing act at its core.
He stressed the urgent need to realign the fund's operational model by strengthening its depositor base, improving cost-of-funds management and implementing regulatory reforms to support responsible long-term investments.
Abdul Rashid, the RHB Group founder who was recalled into the corporate scene to helm Tabung Haji in December 2023, said institutional survival and more importantly, depositor trust hinges on a sturdy legal foundation.
At the heart of the vision lies one critical element: the Tabung Haji Act 1995 (Act 535), which he feels must evolve to sustain the fund's long-term stability.
Why Tweak The Act?
A core challenge identified by the chairman is the structural mismatch between short-term deposits and long-term investment strategies.
Abdul Rashid cautioned that this imbalance poses risks to liquidity and undermines the fund's ability to pursue stable, growth-oriented investments.
Tabung Haji has nearly RM95 billion in deposits from about 9.6 million depositors, as well as RM96 billion in assets.
"You cannot responsibly invest long-term if your depositors can withdraw their funds tomorrow," Abdul Rashid told reporters last week.
Institutional resilience, he said, depends on a legal framework that allows prudent measures - like deposit lock in periods - to safeguard long-term investments from short-term withdrawals.
Without such legal tools, even the most well-intentioned strategies can crumble, he added.
This comes amid active reforms as the Finance Ministry had reportedly announced plans to revise the Tabung Haji Act 1995 (Act 535).
The goal is clear - to fortify governance, integrity and depositor protection in a changing financial landscape.
What The Current Act Covers
Enacted in 1995, Act 535 provides a legal framework for Tabung Haji's multifaceted role - even governing everything from deposit and investment rules to licensing pilgrimage operators.
It explicitly guarantees depositors' savings, reinforcing public confidence.
However, as Tabung Haji's operations evolve - from managing massive funds and serving millions of depositors to shouldering broader liquidity and governance challenges - the act is increasingly seen as behind the times.
Crucial Role Of Legal Reform
Some key areas where the act must be refreshed:
* Introducing withdrawal notice periods for certain deposit accounts to enhance liquidity management.
* Exploring external regulatory oversight, possibly through the Securities Commission or other relevant authorities.
* Ensuring the act allows sufficient governance flexibility to meet modern operational standards.
Abdul Rashid said Tabung Haji's developmental mandate comes with financial trade-offs, particularly when offering subsidised services or socially-focused programmes.
A declining deposit base leads directly to higher funding costs, which in turn distorts the fund's ability to operate efficiently.
When the deposit base shrinks, costs rise, subsidies are distorted and financial pressure increases across the board, he added.
As such, improving cost discipline and stabilising inflows are key pillars of the fund's strategic roadmap.
Abdul Rashid emphasised that while faith is a central component of hajj, affordability must remain a guiding principle.
"You only go to hajj when you can afford it," he said, acknowledging the religious expectation for support but balancing it with financial realities.
He noted that the hajj subsidies are being reviewed and will be gradually reduced in the coming years. This aligns with efforts to ensure that depositors' returns are not compromised in the long term.
If subsidies remain high without sufficient fund performance, depositors could suffer from diminished returns, potentially creating a vicious cycle where Tabung Haji struggles to retain or attract new savings.
Despite a dip in financial returns, Tabung Haji maintains significant subsidies for hajj pilgrims, especially those from B40 households.
In the most recent hajj season, the B40 group received an average subsidy of 55 per cent on hajj costs.
M40 group received a 29 per cent subsidy, with the remainder paid out-of-pocket, while higher-income groups were expected to fully cover the hajj cost themselves, which is RM33,300.
'Buck Stops With Me'
Eighteen months into his tenure, Abdul Rashid, now at the age of 78, is clear about one thing: he prefers to be judged not by intentions, but by results.
He takes full responsibility for the current state of affairs, affirming his leadership and commitment to reform. "The buck stops with me."
As a former corporate leader, he described his transition into this role as a personal and spiritual mission, not a political move.
"This initiative is mine. I've come out of retirement to serve. I'm not here for personal gain. This is about faith and responsibility," Abdul Rashid added.
"Judge me not by what I say, but by what I deliver at the end of my term," he said, reiterating that his vision is to establish a stable foundation for the fund's future.
"Let time decide when my term concludes. Have I moved the needle?" he asked.
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