Kuala lumpur: The role of the Securities Commission Malaysia (SC) as it undertakes to oversee and assume a supervisory framework over the types of investments Lembaga Tabung Haji (TH) makes in line with its policy of balancing returns, protecting capital and ensuring sufficient liquidity to fulfil its haj mandate is crucial, an academic said.
According to BERNAMA News Agency, Senior lecturer in Islamic Economics and Banking at the Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia (USIM), Dr Mohd Faisol Ibrahim, stated that depositors also expect to receive competitive dividend rates from their savings, although TH is a non-banking-based intermediary institution.
The government, at a special sitting on Aug 11, had announced that the management of TH's funds and investments would come under SC supervision to ensure greater transparency in TH's governance and investment management.
During the briefing at the special sitting, Minister in the Prime Minister's Department (Religious Affairs) Dr Zulkifli Hasan said the proposal was among the recommendations of a task force which was established to examine and implement the findings of the Royal Commission of Inquiry (RCI) into TH, including proposed amendments to the Tabung Haji Act 1995.
Zulkifli Hasan mentioned that the task force also recommended that haj management remain under the Minister in the Prime Minister's Department (Religious Affairs), with TH remaining as a single, intact entity. The task force also examined the suitability of an SC-led oversight and monitoring framework over TH's fund and investment management.
Mohd Faisol emphasized that the SC should, therefore, be directly involved in TH's investment committee to ensure that investment decisions do not involve excessive risks, while remaining transparent and capable of generating significant returns for TH depositors.
He added that TH's investment portfolio and investment decisions must be subject to governance, risk-management and disclosure standards comparable to those imposed on other major investment institutions regulated by the SC.
Mohd Faisol highlighted the importance of standards concerning solvency, reserves and investments as well as governance and profit-distribution to be tightened to prevent a recurrence of past issues that deeply affected depositors.
He suggested that the government establish a mechanism of checks and balances to ensure investment decisions are made based on commercial merit, risk and depositors' interests, while being protected from non-commercial interference or considerations. The investment policy should prioritize depositors intending to perform the haj and avoid incorporating government investment policies into TH's investment decisions.
Mohd Faisol proposed the establishment of two special committees - an investment committee and a risk committee - as a double-checking mechanism before any investment decision is made. He noted that major investments should require involvement from several parties, including special committees comprising the SC, Bank Negara Malaysia (BNM), and the Ministry of Finance (MOF).
He also suggested strengthening BNM's involvement as TH's principal adviser to ensure proper review of investment decisions and implementation of strategic risk management.
Mohd Faisol further recommended financial restructuring to ensure that TH's asset and liability positions remain sound over the long term. This could include increasing TH's reserves by raising the minimum savings requirement for performing the haj, considering the strength of the ringgit and the global economic situation.
On July 29, the government made public the 211-page RCI report on TH, which contained various findings, including weaknesses in the institution's management and operations from 2014 to 2020. The report proposed 25 recommendations for improvement, including a ban on active politicians from serving on the TH board of directors, a separation of powers between the Religious Affairs and Finance ministers, and the establishment of an independent body to make board appointments.
The government announced the establishment of the RCI in 2021, followed by the appointment of RCI members on Jan 20, 2022. The RCI report was presented to the Yang di-Pertuan Agong on Aug 30, 2022.