Inside the governance breakdown that rocked Malaysia’s Muslim pilgrimage fund Tabung Haji

KUALA LUMPUR – For decades, Tabung Haji (TH) has been where millions of Malaysian Muslims save for their haj pilgrimage, trusting the state-backed fund to safeguard their savings and invest them responsibly.

With more than 9 million depositors and over RM96 billion (S$30.2 billion) in investments under management, TH is Malaysia’s premier Islamic fund and haj management institution and one of the country’s most vital financial institutions for the Muslim community.

However, a recently declassified Royal Commission of Inquiry (RCI) report and a series of related arrests have sparked concerns over what happens when an institution built on public trust faces issues with political interference, weak governance, and poor financial choices.

The commission reviewed TH’s management and operations between 2014 and 2020. Its 200-plus page report, finished in 2022 and submitted to the King that same year, was only made public on July 29, 2026. An RCI is a high-level public inquiry into matters of significant public interest, with commissioners appointed by the King.

Two UMNO leaders have since been charged in court over the alleged scandal: former religious affairs minister Jamil Khir Baharom and former TH chairman Azeez Abdul Rahim. Both claimed trial.

Governance failures and questionable payouts

Some of the RCI’s key findings were shocking.

TH reported a RM3.4 billion profit in 2017. However, the commission concluded that under proper accounting rules, the fund should have actually recorded a RM1.4 billion loss.

The commission identified accounting practices that artificially boosted asset values. This allowed for unsustainable annual dividend payouts, called hibah, that exceeded what TH could afford.

It also found that despite its worsening financial health, TH paid staff bonuses of up to 13 months, involving a RM74 million allocation for this in 2014. The RCI found the bonuses excessive and inappropriate given TH’s financial position at the time, noting that the institution’s liabilities exceeded its assets between 2014 and 2017.

The commission found that political interests had influenced key decisions regarding dividend rates, haj subsidies, and financial aid for pilgrims.

“Political involvement had resulted in several decisions becoming subjects of political contestation, which affected the institution’s credibility,” the report stated.

It also identified weaknesses in the Tabung Haji Act 1995, which gave the religious affairs minister extensive powers over the institution’s operations, management, and investments.

Poor investment choices were another major issue, as TH held assets that dropped significantly in value. Following a change of government in 2018, these losses were re-examined, leading to a major restructuring.

The RCI said about RM9.7 billion in underperforming assets were transferred to a government-owned firm, Urusharta Jamaah, in exchange for RM19.9 billion in Islamic bonds called sukuk and cash – with the government absorbing RM10.2 billion of the losses. 

The commission called for a complete governance overhaul, including banning active politicians from the board, and launching forensic audits into past investments that caused massive losses.

It also urged splitting responsibilities so that the religious affairs minister manages haj logistics while the finance minister oversees investments and financial matters.

UMNO under pressure as leaders charged

Following the RCI report’s release, prosecutorial action moved swiftly, culminating in charges against former UMNO leaders. Jamil Khir was the latest, being charged on Sept 14.

He pleaded not guilty to three charges of dishonestly causing TH to improperly transfer assets worth over RM860.3 million between 2015 and 2017 to Al-Rawda Real Estates Development and Project Management Co Ltd, a Saudi-based property firm.

The transactions involved long-term leases paid by TH to Al-Rawda for four hotels in Mecca and Medina.

Jamil Khir has defended the strategy, saying the intention was to secure cheaper accommodation for Malaysian pilgrims.

“With regards to accommodation, I took the approach for us to lock the hotels for a long period in order to lock in the best prices to reduce the haj costs,” he told reporters outside court on Sept 14.

The commission had identified the Al-Rawda dealings as troubled investments and recommended a forensic audit.

The property firm failed to make rental payments from March 2019, leaving 560.7 million Saudi riyals (S$189.2 million) unpaid by December 2021.

Similarly, Azeez was also charged and pleaded not guilty on Sept 9 to corruption charges.

He is accused of using his position as TH chairman in 2014 to secure a chairmanship at another company – a role offering an annual salary of RM690,000, along with a luxury car and driver.

Prosecutors alleged that he instructed TH’s then chief executive, Ismee Ismail, to propose him as the fund’s representative in Putrajaya Perdana while persuading the board to approve an investment of up to RM193.5 million in the said company in which he allegedly had an interest.

The TH legal actions occur amid a broader anti-corruption drive, as Prime Minister Anwar Ibrahim’s government places institutional reform and anti-graft measures at the core of its political platform.

In recent months, a government anti-corruption campaign has targeted several prominent UMNO figures. Among them is former prime minister Ismail Sabri Yaakob, who was charged in August for not complying with an asset declaration notice.

The timing was however controversial, raising questions over whether the prosecutions were politically motivated.

Critics point to how the trials came amid a series of state elections in which UMNO chose to contest against Anwar’s Pakatan Harapan coalition, as relations between the former allies grew increasingly strained ahead of the 16th general election.