UiTM Sarawak

Technology Entrepreneurship (ENT 600)

Case Study Assessment ( 20% )
Program : AS222 3A
Product : Tabung Haji

No Members Name Members Id

1 Mohammad Ashraff Bin Sanuddin 2018410712

2 Nur Afiqah Binti Siros 2018234838

3 Nur Fazlin Zafirah Bin Zaine 2018438858

4 Valerie anak Pitrus 2018439362

Maximum Marks
No. Assessment criteria
Marks Awarded
1 Identifications of main issues / problems 25

Analysis of Issues using SWOT & Consumer Trend

2 25
Canvas (CTC) tools

3 Provide suggestions on appropriate solution 25

4 Relates to theory and concepts 15

5 Teamworks 10

Total 100

Lecturer : Abg Hamizam

Signature: _______________________________
Comment :
___________________________________________________________
___________________________________________________________
Content

1.0 Overview of the Industry……………………………………………………..……….……………1

2.0 Overview of the Company…..……………………………………………………………………...1
3.0 Company Development…………………………………………………………………………..…2
3.1 History……………………………………………………………….…………………….…..2
3.2 Services…………………………………………………………………………………….….3
3.2.1 Syariah-Compliant Savings……………………………………………………...……..4
3.2.2 Hajj Management……………………………………………………………….……...5
3.2.3 Subsidiaries Company…………………………………………………………….……6
4.0 SWOT Analysis……………………………………………………………………………….……7
4.1 Strength of Tabung Haji………………………………………………………………….……7
4.1.1 Being the only Hajj institution in Malaysia…………………………………….………7
4.1.2 Have more experience in savings, Hajj services and investment…………….………...7
4.1.3 Evolving efficient system of management……………………………….…………….9
4.2 Weakness of Tabung Haji………………………………………………………….………...10
4.2.1 Financial Management Crisis………………………………………………….……...10
4.3 Opportunity of Tabung Haji……………………………………………………….…………12

4.3.1 Coordination with other agencies & government…………………………….……….12

4.3.2 Malaysian pilgrims increase every year……………………………………….……...12
4.3.3 Has many depositors and branches………………………………………….………...13
4.4 Threat of Tabung Haji……………………………………………………………….……….14
4.4.1 Lost in Market Value………………………………………………………….………14
4.4.2 Scandal 1MDB……………………………………………………………….……….14
5.0 Issue of Lembaga Tabung Haji…………………………………………………………….……...15
5.1 Regarding the misused of the fund in Lembaga Tabung Haji (LTH)…………….………….15
5.2 Interupting of Pakatan Harapan (PH)……………………………………………….………..16
5.3 Has lowest Hibah in 2018…………………………………………………………….……...16
6.0 Recommendations……………………………………………………………………….………...17
6.1 Need to achieve the community level……………………………………………….……….17
6.2 Managed Care Contracts as a Funfing Source………………………………….……………17
7.0 Conclusion…………………………………………………………………………...…..………..18
8.0 Referrences…………………………………………………………………………………..…….18
1.0 Overview of the Industry

Performing Hajj is one of Islam's five pillars that may become mandatory for a Muslim who
has economic capacity to execute this ibadah at least once in his lifetime. In order to make it easier for
Muslims to fulfil this religious duty, nations with a majority of Muslims such as Malaysia, Indonesia
and Maldives have a legal institution to handle hajj funds from depositors and provide facilities. Even
though this institution shares the same objective in term of helping Muslims to perform hajj, their
operational activities are different.

Lembaga Tabung Haji (LTH) Malaysia has become one of a pilgrim fund board since 1963,
where the institution has developed the most modern and profitable pilgrimage administration in the
world. The fund management started since 1980. The diversified investment portfolio of TH is to
cover the rising costs of hajj operation as continue to subsidised the cost of hajj for Malaysian
pilgrims. There are many challenges that LTH had faced. However, they manage to handle all of it. In
Indonesia, they have BPKH which known as the Hajj Fund Management Agency to handles Hajj
pilgrimages. They handle it by holding deposits on behalf of future pilgrims. The deposits are held in
a fund used to help subsidise poorer pilgrims.In Maldives, hajj fund management was not regulated.
Some private hajj tour operator is given power by the executive body in charge of religious affairs.
However the operator had provide very poor services. Due to some of the cases about the services
provided by the agencies, the deputy minister of Islamic affairs and the first chairman of Maldives
Hajj Corporation Ltd (MHCL) produced a public declaration that the government should stop
providing approval to the private hajj group to bring individuals to hajj. Now, an online portal called
“Faheli” is introduced in 2017 to interact with member of MHCL. The services that could be
obtained this online portal include payment of hajj and umrah price without physically coming to the
corporation or via financial institutions.

Hajj fund management organization plays a major role in safeguarding and maintaining the
hajj fund. Beyond this function, it has been demonstrated for centuries in the case of tabung haji in
Malaysia that the institution allows Malaysian Muslims to conduct hajj at affordable rates as the
institution partly subsidizes the pilgrims.

2.0 Overview of company

Lembaga Tabung Haji (TH) is an Islamic organization that continually strives to provide
extensive and systematic services for Malaysia's pilgrim Hajj welfare. The concept of establishing the
potential Hajj Pilgrim Savings Corporation was initiated by a proposition produced in December 1959
by the renowned Malay economist YM Ungku Abdul Aziz bin Ungku Abdul Hamid. The corporation
was named by Perbadanan Wang Simpanan Bakal-bakal Haji (PWSBH). The first step was taken with

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the establishment of PWSBH in 1962 with the purview of the Ministry of Rural Development. Not
long after that, PWSBH began collecting deposits from potential hajj pilgrims in the nation on 30
September 1963. A total of 1281 prospective pilgrim opened their account with a total saving of
RM46610. In 1969, in order to further reinforce its position in the coordination of increasing savings
and hajj management, PWSBH combined with the Hajj Affair management office which had been in
operation since 1951 in Penang. Since then, the new set up organisation was named Lembaga Urusan
dan tabung haji (LUTH) and later renamed as Lembaga Tabung Haji (TH).

In addition to managing hajj pilgrim's welfare, TH also participates in the halal food industry
through TH's worldwide sdn bhd services. Other than that, TH is also engaged, particularly for the
Muslim, in the travel and tours services. Getting involve in the information technology through its
subsidiary, Theta Edge Berhad will have its own benefits such as various services to fulfil the demand
and expectation of the customers. Last but not least, by investing in a joint venture business with alam
maritime resources berhad, TH also offers support services to the petroleum and gas sector. In this
line, its activities are focused towards heavy industrial engineering, specializing in offshore iron
structure fabrication and other offshore oil and gas engineering services in Malaysia.

Now, Lembaga Tabung Haji (LTH) has more than 50 years of experience in savings, Hajj
services and investment. As the country's only Hajj organization, TH strives to reinforce the
Malaysian Muslim economy by using the funds and resources available. In addition, TH also seeks to
provide Malaysian pilgrims with outstanding and satisfactory hajj facilities and its continuous
accomplishments have received worldwide recognition as a role model for innovative hajj leadership.
Last but not least, TH has more than 9 million depositors and a 125 branches with nearly 10 000 touch
point nationwide and also operates an office in Jeddah, Kingdom of Saudi Arabia under the purview
of Malaysian Consulate.

3.0 Company Development

3.1 History

Lembaga Tabung Haji (TH) is an Islamic institution that continuously strives to provide
various facilities which are comprehensive and systematic for the welfare of Malaysian Hajj Pilgrims.
Besides halal savings and efficient hajj operations management, TH also manages investment
transaction to add value to our depositors.

Before this, there was no Islamic financial institution that provided services to save for hajj
expenses in this country. Even though several banks were already operating, the muslims did not want
to use conventional banking for their hajj savings because they wanted to attain a mabrur hajj. In
order to achieve that, they wanted to ensure that their hajj savings were free from riba (usury).

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 The idea to set up the Prospective Hajj Pilgrims Savings Corporation (Perbadanan Wang
Simpanan Bakal-bakal Haji (PWSBH)) was triggered by a proposal made by the renowned Malay
economist, the Royal Professor YM Ungku Abdul Aziz bin Ungku Abdul Hamid in December 1959
to the Federal Government of Malaya.

The first step was taken with the establishment of PWSBH under Law No. 34, 1962, in 1963.
The corporation was under the purview of the Ministry of Rural Development.

On 30 September 1963, PWSBH created history by opening counters to collect deposits from
prospective hajj pilgrims in the country. Malaysian Muslims were taught at an early age on the need
to save in a Shariah-compliant organisation to prepare for their hajj.

When operations began in 1963, a total of 1281 prospective pilgrims opened their accounts
with a total savings of RM46,610. Dividend and bonuses were not in the mind at all, at that time.

The confidence displayed by the prospective pilgrims drove PWSBH to continue upgrading
its services to ensure that it fulfilled the ‘fardu kifayah’ . Since then, PWSBH continued to intensify
efforts in attracting more Muslims to use the savings facility provided by the government to ensure
that their savings were always ‘halal’ and safe.

In 1969, to further strengthen its role in coordinating the expending savings and hajj
management, PWSBH was merged with the Hajj Affairs Management Office (Pejabat Urusan Hal
Ehwal Haji ) which had been in operation since 1951 in Penang. This newly set up organisation was
named Lembaga Urusan dan Tabung Haji (LUTH) and was later renamed as Lembaga Tabung Haji in
1995, known as Tabung Haji or by its acronym TH.

With the establishment of TH, the affairs related to Malaysians’ hajj pilgrimage became much
easier and well-organised. Malaysian Muslims who are making their maiden trip to the Holy Land
would have nothing to worry about because TH looks into all their needs including matters related to
passport, hajj visa, transportation, accommodation in Mecca, Medina, Mina, and Arafah as well as
healthcare and Hajj guidance.

3.2 Services

VISION
The pillar of the ummah’s economic success; excellence in hajj management.

MISSION
 To strengthen the ummah’s economy

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  To remain active in seeking strategic investments locally and globally to ensure sustainable
growth
 To manage and enrich depositors’ funds
 to continuously provide excellent services
 to facilitate and assist pilgrims in achieving mabrur hajj
 to provide competitive, halal and toyyiban returns

CORE VALUES
 Professionalism
 Teamwork
 Committed
 Caring, friendly and compassionate
 innovative

Tabung Haji has been successful in regularly improving its core activities. For example, Hajj and fund
management. The effort in enhancing the quality of its operation is reflected in a number of local and
international recognitions it has received over the years. Included among them is the Islamic
Development Bank (IDB) prize in Islamic Banking won by TH in 1990. This prize is an international
recognition of TH’s success in efficiently, effectively and profitably mobilizing depositors’ fund in
Islamic investments.

Services given by Tabung Haji to Malaysian pilgrims cover all aspects and have been accepted as
amongst the best in the world. The volume of these services can be gauged from the annual number of
pilgrims going from the country. Before 1970, pilgrims had been making their journey by ships and
continued to do so until 1976 while air flight available. Number of pilgrims going for Hajj until early
1970s was about 10,000 but this number roughly doubled to around 20,000 – 25,000 by 1980s. In
1990s, number rose to about 35,000 and peaked to over 40,000 pilgrims in 1992. TH is capable of
handling even more pilgrims.

3.2.1 Syariah- Compliant Savings

Tabung Haji provides Syariah-compliant savings product to Malaysian Muslims. In principle,
savings in TH is for the purpose of performing Hajj. TH continues to transform and enhance its
services to make ease of the saving process for depositors. Savings in TH is simple and guaranteed by
the government. The savings concept in TH is based on Wadi’ah Yad Dhamanah. It is a savings
concept where depositors save their money and TH as the custodian agrees to safeguard the money.

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 There is no limit for cash savings in TH and maximum withdrawal amount is RM10,000 only.
Withdrawal of more than RM10,000 can be made at the TH State and Headquarters by cheque or
telegraphic transfer. Tabung Haji provide convenient for depositors by opening counters in all TH
offices and branches nationwide. Apart from TH counters and Urban Transformation Centre (UTC),
depositors can also perform their TH transaction at strategic partner; Bank Islam, Bank Rakyat,
Maybank Islamic and CIMB Islamic counters, ATM and online banking. Most of the operations have
been computerized to facilitate administrative, Hajj, investments and accounts affairs.

3.2.2 Hajj Management

Hajj passports are issued to Malaysian citizens and permanent residents only. Hajj visas to be
issued by the Royal Saudi Embassy in Kuala Lumpur are arranged for by TH on behalf of pilgrims.
For medical aspect, all necessary medical examinations and inoculations against certain diseases like
cholera, meningitis and influenza are arranged by TH at local hospitals and health centres. If
necessary, the intended pilgrims are also given treatment and even warded before the “certificate of
fitness to perform the Hajj” is issued.

In conjunction with the state religious affairs departments, Hajj guidance courses are given to
the pilgrims at state and district levels. Each group of pilgrims are briefed for two days. Day one
focuses on guidance of ibadat of Hajj and Umrah and questions and answers while the second day
deals with the issues of Hajj administration and health.

Moreover, in order to ensure the welfare, safety and health of pilgrims even during their stay
at the Holy Land, Tabung Haji provides welfare and medical services handled by a number of TH and
government medical officials. Transformed into economic figures, the amount required to finance
every Hajj season exceeds RM200 million (US$53 million) which includes air travel expense,
accommodation and food (since food is also provided by Th to the Hajis). Nonetheless, the charges
are lowest per person i.e. at RM8,585 (US$2,300) compared to other countries in the region.
Singapore, for instance, charges its pilgrims about RM20,000 (US$5,300) and Indonesia about
RM12,000 (US$3,200). The years of experience, good infrastructure, well-planned operations, good
intergovernmental relationship and economies of scale are among the factors contributing to the low
cost and yet high quality services.

Due importance is given to communication between TH and pilgrims. Various informative

pamphlets and flyers are distributed to the pilgrims during the guidance courses. In addition, about a
month before the departure of the pilgrims, cooperation is solicited from the Media the national
newspapers, television and radio stations for publishing and broadcasting articles and programs on
Hajj written or produced by TH.

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3.2.3 Subsidiaries Company
TH involved in Halal Food industry through TH Global Services Sdn Bhd (THGS), a wholly-
owned subsidiary of THHR. THGS core activities include the preparation and distribution of halal and
toyyib food products. It envisions to become one of the key players in the halal food industry. THGS
plays its role in ensuring the best practices are observe and applied in fulfilling the customers’
demands and is confident that halal and toyyiban food will become a staple need in the global food
industry.
TH also involved in the travel and tours services sector through TH Travel and services Sdn.
Bhd, a wholly-owned subsidiary of THHR, TH Travel & Services Sd. Bhd. THTS provides a
complete travel and tours services especially for Muslim. THTS services include hajj & umrah
packages, tours packages, hajj charter services, flight chartering, ticket purchases, halal catering and
logistic services. With more than 30 years experience, THTS offers various services through its wide
network of domestic and international satellite offices, with the promise of “Confidence, Convenience
and Comfort”.

TH’s involvement in In formation Technology (IT) is through its subsidiary, Theta Edge
Berhad (Theta Edge). Theta Edge offers various services to fulfilling demands and expectations of
customers through its products namely the Total Hospital Information System (THIS), Energy
Management System, Integrated Building Management System, Defence and Security Solutions, and
Integrated Logistic Support System. Currently, Theta Edge is emphasizing on telecommunication
services and green energy segments as these two fields are showing sustainable growth which are
aligned with the nation’s dynamic development.

TH provides support services for Oil & Gas industry through its investment through a joint
venture company with Alam Maritime Resources Berhad; TH-Alam Holdings (L) Inc (TH Alam). In
2002, THHE has been listed on the Main Board of Bursa Malaysia on January 2005 and since then
has been strengthening its position through a rebranding effort in June 2012.MIts activities are
focused towards heavy industrial engineering, specializing in offshore iron structure fabrication and
other offshore oil and gas engineering services in MalaysiA. TH Alam provides Anchor Handling &
Tugboats Services (AHTS) to support it's marine transportation services. In 2013, TH Alam has
increased its fleet by two additional AHTS equipped with Dynamic Positioning (DP2) and 150 tonnes
bollard pull capacity, to four existing AHTS with DP1 and 60 tonnes bollard pull capacity. This
addition has strengthened its position as a service provider of choice for marine support operations.

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4.0 SWOT Analysis

4.1 Strength of Tabung Haji

4.1.1 Being the only Hajj institution in Malaysia.

Hajj is a pilgrimage to Mecca during Dzulhijjah (last month of Islamic calendar). It become
mandatory to Muslims when they has ability in finance to perform this ibadah at least once in their
lifetime. Hajj and Umrah is a different meaning. In Malaysia, many Non Government Organization
(NGO) that provides umrah to Malaysian Muslims, whereas Hajj, only Lembaga Tabung Haji (TH)
that provides facilities to perform Hajj in Meccah.

TH is the first institution in South East Asia that provides service to perform Hajj since 1963.
TH is an Islamic institution that provides many facilities which are comprehensive and systematic for
the welfare of Malaysian Hajj Pilgrims.

TH most renowned institution which is claimed to be successful in managing Hajj fund in an

innovative way. Concept that TH used, enable Muslims to save for pilgrimage without worry for the
money being tainted by riba.

Became the only Hajj institution in Malaysia, TH endeavours to strengthen the Malaysian’s
Muslim’s economy matching with their vision which is “ The Pillar of the Ummah’s Economic
Success; Exellence in Hajj Management”. These advantage give more impacts on Muslim society in
Malaysia such as fulfilling the national economic development policy especially in helping to improve
the status of the natives who are mainly Muslims and also as a symbol of economic strength of
Malaysian Muslims.

4.1.2 Have more experience in savings, Hajj services and investment.

Established in 1963, TH began as a pilgrim fund board, and the institution has sucessfully
provides the most “modern and profitable pilgrimage institution in the world”. In Islam, Muslims are
forbidden from involving in economic activities that generate financial interest (riba). Thus TH is the

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best institution because fundamental concept behind the institution is to enable Muslims to save from
pilgrimage without fear of the money being tainted by riba.

Investment is one of the TH’s activities besides Hajj and saving management. From the 1980,
the investment portfolio of TH diversified. The diversified investments in various sector have enable
TH to cover the rising cost of Hajj operations as well as continue to subsidise the cost of Hajj for
Malaysian pilgrims every year. TH investment strategy is based on Strategic Asset Allocation (SSA)
that already been approved by the Minister the Prime Minister’s Department.

This SSA as a module for the investment framework that consist of four main asset class
which are fixed income, equity, cash and property. SAA will reassess periodically at appropriate
intervals in order to rise TH’s investment strategy.

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4.1.3 Evolving efficient system of management.

5-year Financial Highlight

TH has efficient system of management that ensures there is separation between the CEO,
the investment panel, the governing board and also the government auditor general. TH also has
introduced system of accountability as well as encourage full use of the new and modern
technology computers, telefax, Internet and others which have helped to further rising the
financial operation and Hajj services management.

Based on the chart above, we can see there is increasing in revenue, Zakat payment, and net
profit every year. These is proved that the management in TH is very efficient and can be trusted.

TH management is also a on- going process carried over the years to ensure smooth and
efficient Hajj operations. These included the management of passport and flight schedules for all
pilgrims. TH will send the offer letter to all prospective Muassasah pilgrims, whilst pilgrims using
travel package will receive the SJP from thier respective agencies.

There is also health examination where all pilgrims must get two injections which are Anti-
Meningitis Meningococal Quadrivalent ACYW- 135 and aby additional vaccinations imposed by

9
 the Embassy of Saudi Arabia. Below are the Hajj management chart on how TH manage the
pilgrims over the years.

4.2 Weakness of Tabung Haji

4.2.1 Financial Management Crisis

TH experienced management problems especially in financial management. The. government

guarantees every cent of the bank's deposits as opposed to bank deposits that are only insured by
PIDM to a limit of RM 250,000. That makes the rich people to remain in TH and feel safe with their
deposits very secure. It is great for depositors but less stable for the organization of TH.

TH is in a case of liability exceeding the asset and breaches the Tabung Haji Act. However, TH
has consistently given high hibah, in 2013-2017 at a rate of 6.25 – 8.25 percent, far more than a 3
percent benefit rate capable of banks ' fixed deposit account. Though giving the high Hibah it is a
praiseworthy custom by TH and liked by depositors, but the gift is incompatible with the provisions of

10
the Fund Act Haji 1995 and enforced in a less ethical way and may disturbed TH's future In ignorance
and acistyling.

According to the PWC report, it used a ' falsified ' method of generating profit of RM 553 million
from the selling of BIMB shares priced at RM 2,551 bil, whereas it was repurchased at the same cost
the next four days. It was supposedly a wise management to manage and create profit, but it was only
on paper but the fact that there was no profit but had to pay a wage cost of up to RM 36 million to the
broker. This is sometimes used by some institutions and large companies and is considered to be legal
but unethical. In the case of TH, it is used to violate the Tabung Haji and risking TH Act for the long-
term and close management weakness.

The results of the declaration of dividends by subsidiary companies of RM 510 million which the
fact was not fully repaid by the subsidiary company as at the end of 2017, however, is only about RM
200 million paid. By way of recording a depositor's deposit as an reserve included in the asset
category in the case of the fact that it is a liability.

To avoid loss of impairment loss from being recorded in Profit & Loss statement but has been
altered against impairment losses.It also conflicts with the TH accounting policy. In addition, the TH
savings is also a Demand for Deposit. It can be included and released as a result of the daily without
limitation if depositors using cheque and TT production.

Unlimited savings for debiting and having TH ' this, ' risky and vulnerable to ' bank running, ' for
example, if a big debit of money from their investments, then there will be a huge reduction and some
panic. According to statistics, 1.3%, or about 117,000 of the depositor's depositors contributed 50% of
the total RM 74 deposit bills.Hence, it is good in reviewing the policy of production limit and the
debiting of future savings limits.

More serious than that, prior to this, TH's keeper can easily miss out of the Anti-Money
Laundering Act for being beyond the observation and regulatory of BNM.In fact, financial
management ethics and their own self-managed manager, statutory TH reserves in 2017 are only
around RM70 million as compared to the RM 70 bil deposit of only 0.1% compared to its liability.

This is completely unhealthy if it is at 4 percent at 2.8 bil or at least 2.5 billion in compliance with
banking norms, RM 1.75 bil. This should be strengthened so that Tabung Haji's management becomes
better. The fund must be from the yield of TH's operating profit and not from the debiting cash. This
is one of the reasons why BNM is advised to supervise to ensure healthy reserves, liquidity and
liquidity THS as well as the percentage of equity investments and high-instrument risks than deposits
are at a reasonable percentage rate rather than too high as it happens in the last TH management.

According to the PWC study and the management of the new Hajj fund, there was a hibah of cash
and not the surplus of income. If the depositor's money element of the Hibah scheme continues to

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occur; that is the aspect of Pak man Telo or a rich rapid scheme that we want to be out of the service
of Tabung Haji.

Due to the lack of monitoring and regulation of TH, there have been abuse of power and financial
malpractice in advance management, the police report by TH and MACC report was made.Now
awaits further development. Some of the details of an offence may not have been disclosed to the
public by the current management because it is pending legal procedure

4.3 Opportunities of Tabung Haji

4.3.1 Coordination with other agencies & government

Over the years, Tabung Haji has evolved a sound strategy of coordination and cooperation both
at home and abroad. For the purpose of Hajj work, TH coordinates with other agencies, whether
government or private, like the registration department, ministry of health, ministry of national unity
and social development and airline companies. With such coordination these agencies are involved
and have become part and parcel of the Hajj operation.

In addition, TH has established a close cooperation with the Saudi government and other
authorities in Saudi Arabia, to take advantage of the improved facilities provided by the Saudi
government for the Hajj operation. TH has maintained close relationship with the mass media for dual
purpose of disseminating information to the public about TH and giving feed backs about public
concerns, issues and problems.

TH also has identified the suited places to build its very own Hajj pilgrim management complex
each in Mecca, Medina and Jeddah. These will enable the board cost savings and its pilgrims
management will be efficient and smoother.

4.3.2 Malaysian pilgrims increase every year.

Over the years, many muslims in Malaysia has decided to perform Hajj, but due to the limit
number of pilgrims that has been decided by Saudi Arabia, not all can perform Hajj at that time.
Therefore, they sould wait for their turn in next year or several years after. This make the pilgrims
increase every year in the country.

This year, 2019, Malaysia’s Hajj quota only 30 200. Means that, there are millions of people
that don’t have chances going to Meccah for Hajj. This means TH will gain more profit every year
due to increase in the number of pilgrims.

However, Datuk Seri Dr Mujahid Yusof Rawa said that he has submitted a request for a
higher quotato the government of Saudi Arabia during the annual meeting of Hajj ministers held in
Jeddah. The quota should increase to 31 200 said Dr Mujahid.

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 The increase in the number of pilgrims also means that TH has perform better over the years
in their Hajj services and management. This increase the crediblity of TH to be known as one of the
best Hajj institution in the world.

4.3.3 Has many depositors and branches.

TH has more than 9 million depositors and 125 branches with nearly 10 000 touch points
nationwide. As in the chart above, number of depositors increase every year since 2014. An increase
in depositors will increase the net profit of TH. These aslo means that depositor has fully trusted to the
management of TH.

Having many branches around the country make the people easy to visit TH for any business.
For example in Kedah, TH had TH Sungai Petani, TH Baling, TH Sik and TH Guar Cempedak.
Nowadays, branches of TH still expand across the country as well as in overseas.

TH can increase revenues from their new depositors through their branches. These also give
ability to TH to help more people especially the depositors. TH reputation improved over the years
due to increase in depositors and branches. Depositors enjoy the services that TH provide and make
them trust TH fully. Having more branches in oversea such as Wisma Tabung Haji in Mecca have
additional investment opportunities. TH can benefit from lucrative investment opportunities that may
not exist in Malaysia. Therefore this give strength in TH to stand as a role model for innovative Hajj
management.

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4.4 Threat of Tabung Haji

4.4.1 Lost in Market Value

In 2018, stock in the pilgrim fund’s portfolio are not faring better due to domestic and
external factors. TH’s top 20 (T20) most valuable holdings on Bursa Malaysia have returned a paper
loss of 2.74 billion year-to-date (YTD).

Among the biggest drags on TH’s portfolio was the 13.64% decline in shares of BIMB
Holding, give to loss of RM543.28 million in term of market value YTD. TH Plantations Bhd, where
TH owns a 73.84% stake, was another significant letdown as its shares have dropped 54.35% YTD to
52 sen. TH has been a victim of the general downturn in the equity market where KLCI plunged to
4.92% while the Bursa Malaysia Top 100 Index has fallen 8.84%.

Besides T20 companies, companies in which under TH control more than 10% include
ThetaEdge Bhd (68.7%), Pelikam International Corp Bhd (28.66%), Southern Acids (M) Bhd
(13.05%) and Alam Maritim Resources Bhd (10.13%). These all companies’ share prices are alll
down by more than 40%.

4.4.2 Scandal 1MDB

TH has became an issue when it was link with scandal 1MDB. In 2015, Pilgrims’ fund TH
confirmed that ot had bought a parcel of land from 1 Malaysia Development Bhd (1MDB) at the Tun
Razak Exchange (TRX) project after its chairman, Datuk Seri Abdu zeez Abdul Rahim, denied any
such deal a day earlier.

TH chief excutive officer (CEO), Datuk Johan Abdullah said that the fund had invested in a
piece of land with the plan of building a residential tower at the price of RM188.5 million. The
proposed residential building would be developed by TH’s subsidiary, TH Properties Sdn Bhd.

DAP federal lawmaker, Zairil Khir Johari said that “ This issue woud nit be such a major
concern to the public if LTH were a private developer gambling its money on a high- risk project.

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Unfortunately, LTH, as the Malaysian Hajj pilgrim funds board, should facilitate and manage the
saving of Muslims towards fullfilling of the fifth pillar of Islam- the holy pilgrimage to Mecca. With
such a responsibility on its shoulders, investments made by LTH should be shariah compliant and not
overly risky so as not to jeopardise the saving of millions of pilgrims.”

5.0 Issue of Lembaga Tabung Haji

5.1 Regarding the misused of the fund in Lembaga Tabung Haji (LTH).

Local media raised concern in 2015 that the fund was being misused for political reasons
when LTH bought a tiny plot of property from 1 Malaysia Development Bhd's (1MDB) to conceal the
urgent debt payment at an inflated cost. This statement had been shown in the Malay Mail 2015 and
Sarawak Report in 2016. It also became known that the CEO of Tabung Haji, Ismee Ismail, was also a
director in 1MDB. In 2016, the Sarawak Report disclosed that Tabung Haji had breached its own
guidelines, including Section 21 of the 1995 Lembaga Tabung Haji Act, which states that its reserve
must match its liabilities, as well as Section 22 of the Act, which stipulates that it must not issue
bonuses exceeding its profit. After a loss of trust in Tabung Haji, nearly 4,000 depositors closed their
accounts in 2016. This statement was said in the New Strait Times in 2018.

Besides that the issue of misusing of the fund also had been stated in the local news which is
the star online where the news stated that the former Lembaga Tabung Haji (LTH) chairman, Datuk
Seri Abdul Azeez Abdul Rahim has accused Datuk Seri Dr Mujahid Yusof Rawa of misleading the
public by accusing the pilgrimage fund of illegally paying dividends (hibah) to its depositors. This is
because, according to Abdul Azeez, the revelation that Dr. Mujahid produced in which he mentioned
that Tabung haji had a complete shortfall of as much as RM 4.1 billion was innacurate as it was not
mentioned in Ernst and Young's account report, which had valued the realizable asset value of the
pilgrimage fund as surpassing its liabilities. Such a scenario should not occur as it will lead other
individuals to doubt. To be sure that the economic issue can be identified, there is also the
PricewaterhouseCoopers (PwC) LTH report, which was distributed to parliamentary legislators where
it also includes the Ernst and Young report indicating LTH surpluses in their investments in 2015,
2016 and 2017. From that onward, Abdul Azeez also said that he is ready to cooperate with the TH
management and relevant authorities for investigations in order to uphold the reputation of TH.

Other than that, the issue of misused had been stated in the star online on 10 April 2019 where
the manipulation and falsifying of accounts, including using LTH money for political activities, are
among reasons for the fund incurring billions in losses. This issues had been revealed in the
parliament by Datuk Seri Dr Mujahid Yusof Rawa, who briefed lawmakers on the controversies
surrounding LTH. According to him after the speaker Datuk Mohamad Ariff Md Yusof gave him

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approval, LTH obviously falsified the account to conceal the losses that it suffered during the Barisan
National period. He also pointed how much that LTH had losses. However, after the new management
under Pakatan Harapan administration take over, they started to manage all the account back and he
assured depositors that they could look forward to higher dividends for 2019 if the LTH revival plans
went smoothly.

5.2 Interrupting of Pakatan Harapan (PH)

Since PH has take over the government since last year, they have advantage on the business
of TH. Regarding the financial crisis in TH, PH has decided to resolve this problem. In April 30,
Bernama has giving statement that resolving the financial crisis facing the pilgrims’ fund board is PH
biggest achievement after a year of administrating the country. These was taken from Datuk Seri Dr
Mujahid Yusof’s statement.

He said that after going through rehabilition and restructuring exercise, TH was now back on
track and going toward a better future. In 2018, TH became the biggest scandal in the country. PH
came to rescue to make sure TH, as well as the depositor and their savings are guaranteed safe, and
now, it is settled by PH.

5.3 Has lowest Hibah in 2018

Hibah is from Arabic word that means ‘present’. Hibah is one of the services that TH provide.
Recent year in 2018, there is a lowest Hibah in the history of TH. TH already gave information that
Hibah will be lower in 2018 several months before this and only 1-2% chances of Hibah increase in
2018. Meanwhile, TH group managing director Datuk Seri Zukri Samat said in confidence that TH’s
financial position would recover further in the coming year.

There are several reasons on why Hibah became too low. First and foremost is due to weak of
management of TH before this ( because Hibah is a reflection task and TH result management since
year before until 2017 and 2018), and a part of this result was not count as crime because according to
law, ‘certain type of bad invesment decision is not a crime’,and a part of others already report to
police station and already be investigate.

Hibah became lowest in 2018 also due to againts Akta Tabung Haji 1995. In 2015, Tan Sri
Akhtar Aziz has wrote a letter to give warning that TH has problem in lack of assets. Unfortunately,
government ignore it and gave permission to TH to paid high Hibah eventhough the profit not enough.

Politic and economy factors also effect the rate of Hibah in 2018. The change in government
from Barisan Nasional (BN) to Pakatan Harapan (PH) give effect in stock market in Malaysia. Also
has been clarified that TH since several years ago can gave high Hibah due to manipulation of TH
standard accounting and less accuracy of TH account position.

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6.0 Recommendations

6.1 Need to achieve the community level

Tabung Haji's success can be attributed to a large extent to Bumiputra's strong psychological
element showing that Malay Muslim indigenous dominant group can excel in business enterprise and
corporate management involving the fusion of Islamic ideals with corporate ideology and culture. It
can be noted here that in 1991 native Malays constitute about 55 percent of approximately 17.6
million people. During the 1960s there was a growing feeling that during the rapid pace of economic
and social development post-independence, indigenous Malays were bypassed by non-indigenous
ethnic groups.

The disparity between indigenous and non-indigenous ethnic groups was certainly the product
of discontinuities in the country's social and economic structure as a result of nearly a century of
British colonial rule. There is a driving factor responsible for Muslim unity in a racially competitive
environment. Tabung Haji's success shows the actualization of the collective will "Bumiputra.”

6.2 Managed Care Contracts as a Funfing Source

Since LTH had an issue about the misusing of the fund of their company, therefore, they
should have a Managed Care Contracts as a Funding Source. For instant, they can cooperate with
Transparency International Malaysia (TI-M) to manage their company account beside the manager of
TH itself. Transparency International Malaysia is actually an independent, non-governmental and
non-partisan organisation committed to fight against corruption. TI-M was found in 1998 where it was
registered with the the Registrar of Societies Malaysia as the Malaysian Society for Transparency and
Integrity and is the accredited National Chapter of the Berlin-based Transparency International.

TH should cooperate with TI-M as Transparency International- Malaysia (TI-M) ever

involve with the issue of misusing the fund of Tabung haji and they take the issue seriously as the
Malaysian Haji Pilgrims Fund Board's primary function is to promote the savings of Muslims for the
pilgrimage to Mecca. This had shown that (TI-M) take every matter seriously especially if there are
any corruption occur in certain company. This was also followed by their mission which is to
eradicate corruption and promote Transparency, Integrity & Accountability throughout Society. By
the way, corruption for them is when there is an involvement with the abuse of entrusted power for
private gain.

As Transparency International Malaysia is not involve in any political group, therefore, every
movement of certain company will be secure. Without too much politic that involve in a company, all
the issues that had been faced by tabung haji can be overcome. Furthermore, the Transparency
International Malaysia will also help to give voice to the victims and witness the corruption that had

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occur and help the company to work toward a world free corruption. For example, if the issue that had
been faced by tabung haji is not true, they can help to sort it out.

Therefore, to conclude, by collaborate with TI-M, Transparency International-Malaysia (TI-

M) can makes a point of engaging public authorities as well as civil society in fighting corruption and
strives to ensure that governance reforms are carried out effectively in both private and public
institutions. Last but not least, Lembaga Tabung Haji will also can get back on track without making
any serious issue anymore.

7.0 Conclusion

Lembaga Tabung Haji Malaysia is the world's first and only model of a dedicated financial
Islamic institution to handle the Hajj pilgrimage systematically and provide savings and investment
based on compliance with sharia laws. Because Hajj is the fifth pillar of Islam, there are more and
more Muslims who want and are able to perform the Hajj, therefore, the need for a comprehensive
way of managing the entire journey. Tabung Haji is different in that it was set up to realize the
Muslim community's purpose. Over the years, the company has been able to perform effectively and
efficiently. Tabung Haji's success can be attributed to a large extent to Bumiputra's strong
psychological factor demonstrating that Malay Muslim indigenous dominant group can succeed in
business enterprise and corporate management involving the fusion of Islamic ideals with corporate
philosophy and culture. Tabung Haji has made a concerted effort to build a highly motivated skilled
people's system capable of achieving the target that Tabung Haji is aiming for. Tabung Haji's
participatory and service-oriented management philosophy has significantly increased the
organization's performance. Tabung Haji interacts with other departments such as the Registration
Office, Ministry of Health, Ministry of National Unity and Social Development and airline companies,
whether government or private. Muslims in Malaysia should remain loyal to help Tabung Haji
continue to serve and empower the community, especially for the growth and to strengthen the
Muslim economy.

8.0 Referencess

A Comparative Study of Hajj Fund Management Institutions in Malaysia, Indonesia and Maldives at
http://ijmar.org/v5n3/18-009.html

Five (5) Year Data & Statistic at

http://www.tabunghaji.gov.my/en/corporate/corporate/information/five-5year-data-statistics

https://asklegal.my/p/malaysia-tabung-haji-fund-money-hajj-muslims-dividend

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https://themalaysianreserve.com/2018/12/11/tabung-haji-scandal-and-illegal-dividends/
https://transparency.org.my/pages/news-and-events/press-releases/ti-m-urges-lembaga-tabung-
haji-to-disclose-financial-information-on-the-land-deal-with-1mdb

https://www.google.com/search?q=transparency+international+malaysia&oq=tra&aqs=chrome.0.6
9i59j69i57j69i59j69i60l3.1263j0j7&sourceid=chrome&ie=UTF-8#

https://www.nst.com.my/news/2015/09/tabung-haji-issue-address-public-concern-clearly
https://www.slideshare.net/fitriishak/tabung-haji-as-islamic-financial-institutions
https://www.tabunghaji.gov.my/en/corporate/corporate-information/about-us
https://www.tabunghaji.gov.my/en/corporate/corporate-sosial-responsibility/contributions
https://www.tabunghaji.gov.my/en/investment/th-investment/others

https://www.tabunghaji.gov.my/en/savings/general-info/data-statistics

https://www.theedgemarkets.com/article/spv-buy-underperforming-tabung-haji-assets

https://www.theedgemarkets.com/article/tabung-haji-lodges-police-reports-against-former-
chairman-ceos-and-senior-management

https://www.theedgemarkets.com/article/tabung-hajis-assets-exceeds-liabilities

https://www.thestar.com.my/news/nation/2018/12/10/mujahid-tabung-haji-paid-dividends-
illegally-since-2014-as-debts-exceeded-assets

Impacts & Achievement: Tabung Haji at http://islamicmarkets.com/education/impact-achievements-

tabung-haji

Investment at http://www.tabunghaji.gov.my/en/investment/general-info/investment

Tabung Haji as Islamic Financial Institutions at http://www.slideshare.net/mobile/tabung-haji-as-

islamic-financial-institutions

Tabung Haji to build own haj complex in Meccah, Medina and Jeddah at
https://www.nst.com.my/news/nation/2017/10/286289/tabung-haji-build-own-haj-complex-mecca--
medina-and-jeddah

TH announces hibah of 1.25pct for 2018 at https://www.nst.com.my/business/2019/04/476582/th-

announces-hibah-125pct-2018

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