Tabung Haji: Malaysia's model Hajj co-operative

Zakiah Koya

Dhu al-Hijjah 04, 1418 1998-04-01

Special Reports

by Zakiah Koya (Special Reports, Crescent International Vol. 27, No. 3, Dhu al-Hijjah, 1418)

Malaysian pilgrims to the Hajj are often noted by other hujjaj to be among the best organized and most disciplined of the Holy Lands' many annual visitors. It is also often noted that, in contrast to hujjaj from some other countries, they are often young. These simple observations hide a major Muslim achievement which goes far further than simply the successful organization of an annual trip to the Haramain.

The administration of Malaysia's hujjaj is now entirely managed by the country's Pilgrim Management and Fund Board, locally known as Lembaga Urusan dan then Tabung Haji (LUTH). Launched 32 years ago as a modest proposal to aid the Malayan rural economy and enable the Muslims to perform Hajj, one of the tenets of their faith, today LUTH is one of the greatest cooperative success stories in Malaysia, and perhaps one in the world. LUTH's was originally envisaged as a simple saving scheme, to enable villagers to save at the post office for going for hajj. Its basic principles, structured by Royal Professor Ungku Aziz who was then an economics lecturer and who later became the Vice Chancellor of the University Malaya, remain unchanged, but the institution has developed beyond imagination.

At that time, it was normal for rural Malays to save up their paddy surplus to buy buffaloes, and later to convert the buffaloes into land. The land thus bought, after years and years of saving, was later sold off for the cash to perform the pilgrimage. Ungku Aziz realized that this use of land as savings was economically damaging. The trend of owning land as mere savings led to the land being fragmented, under-used and neglected, frequently rented out to tenant farmers at exorbitant prices. In its place, Ungku Aziz designed a simple post-office savings scheme. The intending pilgrim first has to open an account at a post office and save up by buying stamps with denominations ranging from 50 cents to RM100. It was estimated then that it would take 13 years for one to save up the needed funds of RM1,500.

The rural Malays then were also known to have preferred to keep their savings 'under the mattress' rather than to trust commercial banks as they did not want to have anything to do with interest. Thus, when LUTH was first launched, rural savers needed to be convinced that it would not be run like a commercial bank with interest. Instead, it was repeatedly emphasised that it would be run on the basis of investment of the savings in halal activities, and the profit gained would be deposited to the intending pilgrims' accounts as bonuses.

LUTH also began organizing and administering the hujjaj's journeys for them. In its early years, LUTH pilgrims journeyed to the holy land by ship. Then in 1972, LUTH started using Pakistan International Airlines (PIA) to transport the would-be-hajjis. Later, LUTH switched to Malaysian Airlines (MAS). MAS now has a contract with LUTH and makes sure that its thousands of pilgrims get the best service.

LUTH, now with a multi million dollar building to call its own, still runs on the very same principles on which it was first started off. The building called "Tabung Haji" (pilgrimage fund), was completed in mid eighties, the geometric product of reknowned Muslim architect Hijjas Kasturi. In 1984, it was not only the tallest building in Malaysia but was also hailed as the ôhighest Muslim edifice of the worldö.

Over the years, basically, nothing has changed in LUTH except that it has become larger and more efficient. A measure of its success can be taken from the growth in capital and the number of depositors. In 1995, the initial sum of RM100 deposited by intending pilgrim No. 1, Ungku Aziz himself, 32 years ago, had multiplied into a capital of billions of Malaysian ringgit. That year's figures showed that LUTH had 2.75 million savers, holding a total of RM3.113 billion as savings and receiving RM236.5 million as bonuses.

Two years later, as of October 1997, LUTH reported that it had 3 million depositors with total deposits amounting to RM4 billion. It was also stated that there was a profit of RM260 million in last year's accounting period. LUTH's early investments were in shipping companies and plantations. LUTH now has investments in many other types of halal businesses, such as property development and services. Recently, when Malaysia's religious authorities ruled that it was haram to invest in tobacco companies, known for promoting immoral activities such as rock concerts and addictiveness, LUTH withdrew its investments from such companies.

LUTH has time and again been hailed as a model for Islamic banking. Today, depositors or intending pilgrims do not need to go to to the post office to buy stamps to save up for the pilgrimage. With its branches all over Malaysia, one can deal with LUTH directly. Furthermore, LUTH employees are said to work on the principle of 'For Now and the Hereafter', providing service with reward from Allah in mind.

One is also encouraged to start saving at a very tender age to be able to go on the pilgrimage when he or she turns an adult. Today, not only the rural Malays but Malaysian Muslims from all parts of society stand proud when they hold an account with LUTH as an intending pilgrim.

Indeed, with much preparation and all travelling facilities and Hajj needs taken care of, from prayer beads (tasbih) in hand to accommodation and safety, LUTH pilgrims - who now include depositors from neighbouring countries, such as New Zealand, Fiji, New Caledonia, New Guinea, Australia, Korea, Japan, Hong Kong and Taiwan - find that they only have to concentrate on one thing: perfoming the Hajj.